Slide 1: Olin Corporate Strategy
All financials are for the year ending December 2002 and in millions of U.S. dollars. Olin Corporate Strategy Olin Corporation Goal: Superior Shareholder Returns TRS in Top Third S&P Mid Cap 400 ROCE Over Cost of Capital Over the Cycle
Slide 2: Chlor Alkali capacity changes and Olin Metals
A $10 Per ECU Change Equates to an $11 Million Change in Pretax Income at Full Capacity, or $.11 Per Share @ 40% Tax Rate Favorable Chlor Alkali Factors • Olin Operating Rates Expected to Be in Mid-90% Range in Second Quarter • Olin Has Number One Capacity Share East of the Mississippi River, But is
Slide 3: U.S. Brass Rod Consumption
1H2003 consumption may be lower than 1H2002. We believe the normalized market is 1.3 – 1.4 billion pounds per year. U.S. Brass Rod Consumption In MM Pounds
Slide 4: Metals first quarter results and second quarter outlook
1H2003 consumption may be lower than 1H2002. Metals • 1Q’03 Operating Income $0.3 Million, Includes $3M of Chase Profits — Compared to Profit of $2.3M in 1Q’02 — Lower 1Q Due to Softer Volumes ($1.5M), Cost Escalations ($2.0M) in Wages, Medical and Workers Comp., and Higher Natural Gas Costs ($1.4M)
Slide 5: Key Drivers – Brass Strip
Integrated Mills (60%) Olin OAB Reroll Mills (11%) PMX Olin Distribution (29%) Revere Heyco Olin (A.J. Oster) Hussey Wieland Copper and Brass Miller Scott TW Metals Scott Others Others Brush Wellman NGK Imports Key Drivers – Brass Strip • Sensitive to Changes in the Economy • Changes in Demand for S
Slide 6: Brass Strip Mill Shipment Profile, 2002 vs. 2000
1H2003 consumption may be lower than 1H2002. We believe the normalized market is 1.3 – 1.4 billion pounds per year. Brass Strip … Mill Shipment Profile Market Segment Base 2000 Index 2002 Auto Electrical Computer/Telecom Electrical Bldg/Household Other Transportation Other Commercial Coinage Ammunit
Slide 7: Demand Drivers: Building Products
Demand Drivers Building Products Housing Starts # of Bathrooms — Home Intensity of Use Product Innovation Average Age of Homes Existing Home Sales Low Mortgage Rates
Slide 8: Factors Affecting Chase Brass in 2003
Factors Affecting Chase Brass in 2003 • Lower Commercial Construction • Less Capital Spending for Industrial Machinery • Lower Automotive and Truck Sales • Housing Remains at Healthy Levels Brass Strip & Rod Producers Are Struggling With Anemic Demand in Key Downstream Markets Sales in $M % Change O
Slide 9: Key Drivers – Chlor Alkali
Source: CMAI Chlor Alkali Report • 4 th Overall in U.S. Capacity • #1 Capacity Share East of the Mississippi River • Strong Regional Supplier of Caustic and Chlorine • Olin Has 1.15 Million ECU Capacity Per Year (1) • A $10 / ECU Change Equates to an $11 Million Change in Pretax Income at Full Capac
Slide 10: U.S. Chlorine Segment Growth 2002–2006
U.S. Chlorine Segment Growth 2002 – 2006
Slide 11: U.S. Caustic Soda End Uses
Source: CMAI Cumulative Demand Increase (‘000 ST/Y) U. S. Caustic Soda End Uses 2002 Demand
Slide 12: U.S. Caustic Segment Growth 2002–2006
Source: CMAI U.S. Caustic Segment Growth 2002 – 2006
Slide 13: Manufacturing Cost Structure, Gas at $2/mmbtu
Source: CMAI Cumulative Demand Increase (‘000 ST/Y) Manufacturing Cost Structure “Typical” Gulf Coast Diaphragm Plant Nat. gas @ $2/mmbtu
Slide 14: Manufacturing Cost Structure, Gas at $5/mmbtu
Manufacturing Cost Structure “Typical” Gulf Coast Diaphragm Plant Nat. gas @ $5/mmbtu
Slide 15: Olin Return to Profitability in 1Q 2003
Olin Return to Profitability in 1Q 2003 (Excluding Charges) Ÿ Net Loss of $39 Million, Or $.67 Per Share, Which Includes Restructuring Charge and Accounting Change Ÿ Excluding These Charges, Olin’s Adjusted Net Income Was $5.1 Million or $.09 Per Share Ÿ Results Much Better Than 1Q’02 Due to Higher
Slide 16: Pension Plan and Financial Flexibility
Pension Plan • In 2002, We Recorded a $220 Million After Tax Charge to Shareholder’s Equity • This Was a Non-Cash Charge • Lowered Discount Rate From 7.5% to 6.75% • Cash Contributions to the Plan Not Expected Until 2005 • Expect Annual Pension Expense Could Increase in the $10 Million Per Year Rang