Good morning, and welcome to the Olin Corporation's First Quarter 2025 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Steve Keenan Olin's Director of Investor Relations. Please go ahead, Steve.

Thank you, operator. Good morning, everyone. We truly appreciate you joining us today to review Olin's first quarter results. Please keep in mind that today's discussion, together with the associated slides and the question-and-answer session that follows will include statements regarding estimates or expectations of future performance. Please note that these are forward-looking statements, and that Olin's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described without limitations in the Risk Factors section of our most recent Form 10-K and in yesterday's first quarter earnings press release. A copy of today's transcript and slides will be available on our website in the Investors section under Past Events. Our earnings press release and related financial data and information are available under Press Releases. With me this morning are Ken Lane, Olin's President and CEO; and Todd Slater, Olin's CFO. We'll start with some prepared remarks, then we look forward to taking your questions. In order to give everyone an opportunity, we will limit participants to one question with no follow-ups. I'll now turn the call over to Olin's President and CEO, Ken Lane.

Thanks, Steve, and thank you to everyone joining our call today. Let's start with a few first quarter highlights on Slide 3. Looking across the global macro environment, economic uncertainty continues to dominate the narrative. Against this backdrop, everyone here at Olin continues to focus on the path we laid out during our Investor Day, while closely managing the factors within our control and advancing our value creation strategy. As a result, we're increasing our cost reduction target to $50 million to $70 million related to productivity and structural cost improvements for full year 2025. During the first quarter, our Chlor Alkali products and Vinyls business exceeded expectations as several planned and unplanned industry outages reduced first quarter chlorine and caustic soda supply. In response, we delayed the planned first quarter outage at our Chlor Alkali facility in Freeport, Texas, to meet customer needs and we're pleased to help many customers during the tight market conditions. This is in line with our value-first commercial approach and as we've consistently said, Olin is ready to raise operating rates to meet demand at fair values. We view this as a positive true point for our Chlor Alkali loaded spring that will be more apparent as we emerge from this extended trough environment. During the first quarter, we also saw stable ECU values continue with positive pricing trends into the second quarter. In our Winchester division, domestic and international military ammunition volume continues to grow while commercial sales continue to be weak as retailers destock, coupled with lower consumer sales. Also during the first quarter, Olin took advantage of historically narrow spreads and successfully refinanced our nearest debt tranche through a bond issue and bank refinancing. This pushed our nearest debt tower out to 2029 and positions us very well to weather the…

Thanks, Ken. I'll start with Slide 9 for a review of our sequential quarterly adjusted EBITDA bridge. The adjusted EBITDA comparison from fourth quarter 2024 to first quarter 2025 is highlighted here by business. Our Chlor Alkali Products and Vinyls business benefited from our decision to delay the Freeport maintenance turnaround until the second quarter, resulting in higher sales than expected and lower turnaround costs. As we anticipated, our Chlor Alkali results were affected by lower ethylene dichloride, EDC pricing. Our Epoxy business continued to benefit from modest Epoxy resin price improvements and saw lower-than-normal seasonal volume increases. But this favorability was more than offset by higher raw material and operating costs. Winchester results were negatively impacted by lower commercial ammunition demand. In addition, tariff actions have raised the domestic cost of commodity metals, further pressuring Winchester commercial margins. These higher costs have proven difficult to pass along in the weak demand environment. Now let's turn to Slide 10 for a look at our cash flow and liquidity. The increasing uncertainty in the macroeconomic environment reinforces the importance of Olin's investment-grade balance sheet and strong cash flow generation. During the first quarter, we further enhanced our financial resiliency as our team executed a well-timed bond issuance and debt refinancing, which provided a leverage-neutral extension to 2033 of our nearest bond maturities as well as an extension of our senior credit agreement from 2027 to 2030. We now have no material required debt repayments until mid-year 2029. We have the tools, discipline and flexibility needed to deliver resilient operating cash flows across the cycle. As we expected, first quarter 2025 operating cash flow was negatively impacted by our normal seasonal working capital growth. By year-end, we expect to liquidate our seasonal build-in working capital and in fact, expect working capital to…

Thanks, Todd. Let's turn to Slide 11, and our outlook for the second quarter. Our Chlor Alkali products and Vinyls business continues to perform well. We're holding true to our disciplined value-first commercial approach and the proof of our success lies in our ability to preserve value, even though this deep and long economic trough. Caustic Soda prices are rising and we're seeing seasonal recovery in demand for bleach and caustic soda. Our Epoxy business is slowly improving, but still faces significant challenges. We're making good progress with our self-help efforts as we continue to focus on cost control and growth in our more profitable formulated solution product lines, but the global capacity overhang will continue to be a headwind for the foreseeable future. The commercial ammunition market is also challenging at the moment, but this is not structural. Consumers are cautious and have pulled back at the same time that retailers are trimming inventories and tariffs are inflating metal costs. This combination will continue to weigh on Winchester earnings in the second quarter. However, our military and law enforcement business outlook remains robust. Against the backdrop of heightened macro uncertainty, we expect our second quarter 2025 adjusted EBITDA to be in a broader range of $170 million to $210 million, including an approximate $40 million sequential chemicals turnaround expense headwind. We expect the overall direct impact of tariffs to be net neutral to Olin earnings. We say this as we generally source and sell where we produce. We can't speculate on potential indirect or secondary tariff impacts, including effects on demand. Finally, as we've discussed today, we continue to navigate this challenging environment by managing the factors that are within our control and by executing our long-term strategy. To that end, I'm delighted to share that yesterday, retired U.S. Army General Edward M. Daly was officially elected to Olin's Board. General Daly's last assignment was as the 20th Commanding General of the U.S. Army Material Command, where he oversaw 190,000 people across more than 150 countries. General Daly provided logistics and material readiness across the U.S. Department of Defense and the Joint Forces. As part of Olin's Board, General Daly will provide invaluable input and guidance related to our company's strategy. Operator, we're now ready to take questions.

[Operator Instructions] The first question today comes from Patrick Cunningham with Citi. Please go ahead.

Hi, good morning, Ken and Todd. Could you provide an update to sort of volume and price outlook for Chlor Vinyl sequentially? It seems like you got a clear signal on further price support in the first quarter. How would you characterize the pricing across the major derivatives, particularly EDC as it's been the weakest one?

Good morning, Patrick. Thanks for joining us. Yes, so we are continuing to see weakness, particularly around the EDC pricing, but we don't see it getting significantly worse than where it now. Price levels have already reached a point where even Asian producers are underwater, and that's going to keep a floor under EDC pricing. So like we said in the prepared comments, we see positive pricing trends going into Q2, particularly around caustic. And so with the seasonal improvement that we're expecting there, combined with improvements that we see seasonally with bleach, we feel really positive going into the second quarter around price developments for chlor-alkali.

The next question comes from Aleksey Yefremov with KeyBanc. Please go ahead.

Thanks. Good morning, everyone. You mentioned you're adding value for every ton of told PVC. So should we assume that your [technical difficulty] I guess, PVC resin is cash positive? And how are you planning to ramp up your Kem One tolling volumes for the remainder of this year?

Good morning, Aleksey. Thanks for the question. Yes, we're going to be ramping up through the end of the year. There's obviously uncertainty just around the economic environment, but we've had very positive reception in the market with our sales team for PVC volumes. It is cash positive to us for the PVC sales that we're tolling through Kem One. And I think that just shows the strength of the advantage that we've got in our structure that we're going to continue to leverage. Longer-term, we see this being a very positive growth opportunity for us. And I'm extremely proud of the team and what they've been able to do in a very short amount of time. We've assembled a small team. They've managed to get into the market and realize some sales and start building a portfolio with customers and it's great to see. So we're really excited things that are happening today, and we're setting ourselves up for a really positive future here.

The next question comes from Hassan Ahmed with Alembic Global. Please go ahead.

Good morning, Ken and Todd. Question, it seems, in Q1, you guys talked about it in your prepared remarks that you took advantage of some industry outages. So just trying to get a sense of historically, you guys have talked about your operating rates being in the 60s on the CAPV side of things, the industry running at maybe in the 80s. So just trying to get a sense of where your operating rates were in Q1, particularly as you took advantage of those industry outages.

Good morning, Hassan. Yes. I mean, listen, what you said is correct. We did take advantage of some of the increased spot demand that we saw in the first quarter and deferred that turnaround during Q1, which as a result did elevate our operating rates during the quarter versus what we thought. You may remember back in the earnings call for fourth quarter, we had indicated volumes would be softer in Q1. That turned out not to be the case because we were able to run a little bit harder and deliver product that our customers needed. Frankly, some customers that we've not supplied in a while, which was nice to see. But again, that was spot demand. So we're going to be opportunistic with that and continue to be disciplined. But what we are seeing as a result is, in Q2, our operating rates are back down as you would expect because the turnaround has moved into Q2. So it just reflects exactly what we've been saying is continuing to be disciplined and operating at rates that reflect the values in the market that we want. And we continue to see strength on the caustic side of the ECU and we're going to balance that with the demand around chlorine at the value that we like.

The next question comes from David Begleiter with Deutsche Bank. Please go ahead.

Thank you. Good morning. Ken, on the same topic, do you expect to retain any of the spot business you realized one in Q1 going forward?

Thanks for the question. Good morning, Dave. So, listen, I think just by definition, it's spot volume. So it is opportunistic. And what I expect is we're going to continue to see some volatility as others have turnarounds either planned or unplanned. You're going to see some opportunities for us to sell a little bit more volume here and there. But I would not say that that is going to be consistent because we've not contracted that volume and that's by intention

The next question comes from Josh Spector with UBS. Please go ahead.

Hi, good morning. I wanted to ask just on Winchester kind of two things. First, can you kind of give us a bridge year-over-year between what's the EBITDA decline from lost volumes versus higher costs? And then with your guidance for the next quarter, there are some moving pieces. Do you think EBITDA is higher or lower sequentially?

Yes, good morning. So like we said in the prepared remarks, we expect to see a little bit of an improvement in Winchester for the second quarter. Some of that is frankly related to the White Flyer business that we acquired at the end of 2023. This is typically a time when we see some seasonal improvement for White Flyer, but we will see some improvement as well in the commercial demand, although more modest than what you would have seen last year. And military is going to continue to improve in the second quarter. So the biggest driver for the decline year-over-year is going to be the commercial demand, but the headwinds around metals and propellant costs is a meaningful part of the decline.

In a high level, you should think of the year-over-year first quarter decline roughly two-thirds is volume and price and one third is cost, higher commodity metal costs and propellant.

The next question comes from Steve Byrne with Bank of America. Please go ahead.

Ken, I'd like to follow up on two things you said. You referred to the capacity overhang in Epoxy and you have this turnaround in Stade coming up. But is that a business that just warrants more shuttered capacity for you to drive a recovery? And the other comment you made was you referred to Winchester as an iconic brand. Could you take an approach to pushing price by calling it a surcharge or something to lead the higher pricing in Winchester in ammunition at the commercial level?

Good morning, Steve. First, I'll take your question on Epoxy. Epoxy, there is a significant amount of overhang, particularly in Asia that has been built over the last several years and frankly, that's continuing even this year. We have already reduced a significant amount of capacity and the capacity that we have remaining we think is the most competitive, at least, in the Western world. So there's not really room for us to take more capacity out. And then recall what we said at Investor Day is the reason that we've got Epoxy in the portfolio is it generates very good value based on the integration. The other thing that I want to remind everybody about is, when you think about Europe, we do have some tailwinds that are going to be coming. We'll start to see the impact in the first quarter from this -- the new cost structure that we're going to have in place in Europe with the new agreements that are going to begin at the end of the year, but we won't see the impact of that until the beginning of Q1. So between the integration value and some of the changes that we've got in the commercial agreements in Europe, we will start to see some improvement in the Epoxy business. Most likely it's going to be in the first quarter, but it should be a meaningful improvement. Now, going back to Winchester, frankly, like we had said, the biggest issue there is the fact that there's so much inventory that remains and continues to come down, but not as fast as we had hoped, just because sales out the door at the retailers is slower. So frankly, doing any more on pricing, I think is going to be very hard to do in this environment. We just haven't reached an inflection point yet that would allow that sort of thing to happen. It will come. We're still very bullish on Winchester in the mid-term, but we just have to work through this inventory build that really was unprecedented combined with the higher costs that we're seeing. It's sort of the perfect storm and it will pass, and then Winchester is going to continue to be a great growth platform for us.

The next question comes from Arun Viswanathan with RBC Capital Markets. Please go ahead.

Great. Thanks for taking my question. Hope you guys are well. Obviously, a very volatile, challenging environment out there. We've seen some downstream weakness. I'm just kind of curious, I know caustic has held up a little bit better. So as you look out into Q2 and maybe even the summer months with the water treatment season coming up, do you anticipate some caustic softness to emerge because operating rates will likely go up seasonally speaking? And again, maybe there's some downstream demand that's also going to back up. So maybe you can just kind of reiterate your views on caustic and maybe even PVC as you look out? I know you don't participate directly in PVC, but -- or maybe even EDC? Thanks.

Yes, good morning, Arun. Thank you. Listen, we don't -- when we think about the amount of chlorine that you're going to produce for the bleach market, it's relatively small to the caustic market. So that's not going to put any pressure on caustic. Caustic market is so much larger and we are seeing some seasonal improvement. Continue to see strength frankly in pulp and paper, alumina as well. So those markets are large, much larger than the bleach. So when you think about the balance of chlorine that you're producing for a bleach position or water treatment versus the size of the caustic market, it doesn't move the needle. It just is not going to not going to put any kind of pressure there. But like we have said in the prepared remarks, we continue to see strength in caustic. We expect that to continue into the second-quarter. We're very close with our customers. As you can imagine during a time like this, you've got to be talking to them even more. And frankly, we're not hearing a lot of negativity. We're hearing uncertainty, but we're not hearing customers really being negative about their outlook. If anything, what we're hearing is, hi, we expect things to be stable and we'll see if things improve, but we're not hearing much in the way of negativity and decline. So I take some positive away from that because again, as much uncertainty as there is out there, it could sound more negative than what we're hearing, so I'm cautiously optimistic.

The next question comes from Kevin McCarthy with Vertical Research Partners. Please go ahead.

Thank you and good morning. Ken, I'd like to come back to Winchester and appreciate your thoughts on what you would consider to be the structural or normalized profitability of that business. Part of the reason I ask is, if we look back at history pre-pandemic, maybe EBITDA trended on either side of $100 million. And then what happened was, it quadrupled for a couple of years. And then we've regressed back down. So when you think about where we are in the first quarter, where do you think we are relative to normalized for Winchester, given the various headwinds that you articulated? And how might it change if at all through the AMMO deal?

Good morning, Kevin. That's a great question. And listen, yes, we are definitely -- it's not a cyclical business, but we're in a trough for Winchester today for sure. One of the things, if you just look at the past few years that has really significantly improved the earnings capacity for Winchester, it's a combination of, we've got the new Lake City business that's going to continue to deliver and we've announced on the earnings call that we have a three-year extension. So we're going to now be operating that facility through 2030. We made the acquisition of the White Flyer business, which was highly accretive. That was a very good acquisition for us in terms of return on that. We do have the AMMO Inc. acquisition that we've just made and we've talked about the $40 million of synergies that we're going to realize over the next few years and that will be accretive to us this year as well. So when you think about the last 12 months and you look at the earnings level there, there's a lot of growth that's still to come. So we remain very bullish on the future of Winchester's earnings. And last year the impact from inflation and the squeeze on the consumer combined with the higher costs and the higher inventory at our retail customers has got to flow through the system. And once we get through this time and the consumer is able to afford more and they start consuming more, we're very optimistic that we're going to see a strengthening in the Winchester business in the next 12 months to 18 months.

The next question comes from Frank Mitsch with Fermium Research. Please go ahead.

Thank you. Good morning. Ken, I want to follow-up on Epoxy. It seems like unfortunately the South Korean lobbyists are very effective at their job. So we're not going to get the sort of benefits on antidumping. And you mentioned earlier that you have new agreements in place in Europe, but that should start kicking in in the first quarter of '26. So are we looking at a lost year here in Epoxy? I mean, what needs to happen in order to get Epoxy back into the black in 2025?

Good morning, Frank. I would not call it a lost year, but I do think that you're going to see Epoxy continue to struggle in 2025. We've got some tailwinds related to some of the antidumping duties. On some of the countries that we've seen, we have seen some positive impact. Pricing has improved. We've seen some improvement in volume, where we've had customers that were not buying from us that have come back to us. So we've seen those improvements already flow through in the P&L. We did have some cost headwinds in the first quarter related to some unplanned outages and just some other things that were not related to the market. But I do think that this year is going to continue to be a struggle for the Epoxy business. However, I think by the time we get to the end of the year to the beginning of next year, we will start to see a positive result coming out of Epoxy. But don't forget, the integration value there is still in the mid to high double-digit millions that it creates for us being integrated with our Chlor Alkali assets. So it still is very positive for us to have that in the portfolio, and we're going to continue to manage our product portfolio more towards higher value formulated solutions. And we're already seeing growth in that business for us to this year as well. So a lot of good things that we're doing that are within our control, but it is a challenging environment for sure.

The next question comes from Pete Osterland with Truist. Please go ahead.

Hi, good morning. Wanted to ask one on the increased cost cutting target for the year. Just in the context of the 250 of cost savings you're targeting for 2028, do you view the increase you just announced for 2025 as a pull forward that's included in that target, or are these incremental? And in which segment or segments are the extra savings this year concentrated?

Good morning, Peter. Some of that is, we are working to accelerate some of our structural costs for sure, some of our structural cost savings, but we're also working very hard. We've got robust processes in place to find productivity opportunities as well during the year. And so all of those things are like I had said in the prepared comments, these are things that we can control. And the team is very focused across all of our sites, across all of our functions at finding ways to reduce costs and be more efficient. So it's a combination of accelerating some of our structural cost savings that we've talked about as well as increasing the productivity savings that we can realize in 2025.

The next question comes from Vincent Andrews with Morgan Stanley. Please go ahead.

Thank you. Can I ask, you've lowered -- it says you've lowered your annual capital spending by $25 million. Is that just for 2025, or is that a change you've made -- the perpetual benefit? And I guess within that question, I just would also like to ask on the PVC strategy, what, if any, capital-light opportunities do you see there?

Good morning, Vincent. Thanks for the question. Yes. So the reduction that we are announcing for our capital spend this year doesn't change what we talked about at the Investor Day, which is you can think about an average level of spend for us between now and 2028 of around $250 million. That's still going to be the case. So what we're doing is we're trying to optimize spend on assessing and investigating some of those growth opportunities that we talked about at the Investor Day. We're going to just be a little bit more prudent with the spend there. We're continuing to make progress on investigating, looking at some of those growth options that we talked about around our water treatments, the bleach space, the PVC space as well. We want to keep looking at those things. We don't want to take our eye off of the future. So we're just trying to tighten our belt a little bit here this year. We're going to spend what we need to spend to be able to operate safely and reliably. Related to PVC specifically, we're going to look at all options. We will continue to explore potential commercial agreements similar to what we have today to continue to have exposure to the PVC market. But what you see us doing with our business development activities through our tolling arrangements is we're building the capability to be able to do something directly in PVC either through a joint venture with a new PVC asset in the next, say, five and a half years to six years or something similar to that. So there's more that we've got to do to study that. We're already talking with potential partners. We're talking with also potential technology providers. So those are things that we've got to do to be ready. And I'm really happy with the progress that we're making.

The next question comes from John Roberts with Mizuho. Please go ahead.

Thank you. Is the difference on the purchase price for AMMO related to an earnout, or what is it that lowered the price there?

Good morning. Good morning, John. No, it's not related to an earnout. Frankly, the team did a very good job working through some things as we approach closing on that to find areas of value for Olin. It's also lower working capital when we closed the deal. But again, we did a tremendous job finding value in that deal and we're going to be able to realize a tremendous return on that investment.

And candidly, the lower working capital is working capital we didn't want anyway.

The next question comes from Matthew Blair with TPH. Please go ahead.

Thank you, and good morning, Ken and Todd. If we can circle back to caustic. So you mentioned some positive trends in pulp and alumina. Your guidance includes higher caustic prices for the first quarter. I think U.S. spot caustic has been moving up as well. I would say the one red flag is the recent drops in Southeast Asia caustic prices, I think they've fallen by about $35 a ton over the past three weeks or so. What's driving that delta between the U.S. and Asia market? And do the falling values in Asia represent a concern?

Good morning, Matthew. Listen, we're watching that very closely as well. I don't see that as a concern for us. When we look even here domestically, we're already seeing those price increases firm. We mentioned in our prepared remarks that there is a potential upside just related to the tariffs on caustic imports to the East and West Coast from Europe and Asia, respectively. And frankly, we are seeing that get passed through in the market. So we still feel very good about the outlook for caustic in the markets where we mainly participate, which is going to be in the Americas. We see continued strength in Latin America as well. So we're remaining to be very constructive on our outlook for caustic in the second quarter.

The next question comes from Mike Sison with Wells Fargo. Please go ahead.

Hi, guys, good morning. Nice quarter. You mentioned that caustic is the stronger side of the ECU. How do you -- what's sort of the thought about taking advantage of that? Or are you still really focused on sort of managing to the weaker side being chlorine, where I think longer term your earnings power really can take off?

Good morning, and thanks, Mike. I mean, listen, we are taking advantage of that, but we're going to do it in a disciplined way. So part of that is our EDC position. EDC is our flywheel and we're going to continue to participate in the EDC market, because we are the lowest cost producer of EDC. There are a number of players in Asia that have already backed off their production. And what that does is it allows us to maintain a very good value approach around our caustic position in the markets where we like to participate. I just mentioned that's primarily in the Americas. So we are actually optimizing that today. But we're not going to start pushing chlorine or chlorine derivatives into the market just to make caustic. That's not going to be the strategy. We're going to stay focused on the ECU values that we're realizing. And as long as we see values there that are attractive to us, then that's how we're going to set our operating rates.

The next question comes from Jeff Zekauskas with JPMorgan. Please go ahead.

Thanks very much. I think Dow wants to sell various assets in Europe. Would you be interested in looking at any of those at the appropriate value? Do their plans perhaps make it more difficult for you in your European operations, or do they not really touch you? And then secondly, can you talk a little bit about the wind turbine market in Epoxies? How important is that for you? And what are the current demand trends?

Good morning, Jeff. So listen, I think just in terms of the Dow assets or M&A in general, we're not going to comment on anything in particular. What I'll do is just go back to what we said at our Investor Day and the areas that we're going to look to grow and invest in are predominantly going to be in the areas of water treatment. So you think about our bleach business, we've talked about the PVC business and those are the areas that really we're going to focus on. So the good thing that we see related to Europe for us is that we do have the new cost structure that's going to be coming through with the new agreement that we've got in place that's going to start to show up in Q1, that's really meaningful for our Epoxy business. So that's one touch point that we've got with Dow that is going to be very positive for us. With respect to the wind business, that's an important business for us. We're a leader in the wind business for Epoxy. We are seeing -- we're still seeing growth year-over-year. So we're going to see this year probably somewhere low double-digit growth versus prior year. And it fits very well with what we said around our growing in the formulated solutions area. We're a leader there. We're going to see growth there this year and that's part of what's going to help our earnings continue to improve as we go through 2025.

As there are no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Ken Lane for any closing remarks.

Thank you, Betsy. I just want to say thank you to everybody for joining us today. We're really optimistic about the future of Olin. We've laid out a great strategy. Our team is focused on the things that we can control and we're going to continue to do that without taking our eye off the future. So we wish you all a very safe weekend and look forward to speaking to you at the end of the second quarter.

Thank you for attending today's presentation. You may now disconnect.