Olin Corporation · NYSE:OLN
Olin — Bank of America Merrill Lynch Industrials & Materials Conference 2012
23 slides from Olin's conference presentation, Sep 4, 2012
Slide 1: Bank of America Merrill Lynch Industrials & Materials Conference
1 Bank of America Merrill Lynch Industrials & Materials Conference September 5, 2012 Exhibit 99.1
Slide 2: Company Overview
2 Company Overview All financial data are for the quarter and six months ended June 30, 2012, and the year ending December 31, 2011. Data are presented in millions of U.S. dollars except for earnings per share. 2011 results include a pretax $181 million gain associated with the remeasurement of Olin
Slide 3: Investment Rationale
3 Investment Rationale • Leading North American producer of Chlor-Alkali products • Leading producer of industrial bleach with additional growth opportunities • Leading producer of burner grade hydrochloric acid • K.A. Steel Chemicals Inc. acquisition enhances bleach capacity and distribution channe
Slide 4: Improving EBITDA
4 Improving EBITDA • Since 2000, net chlor alkali capacity has been reduced in North America by approximately 7% • The North American chlor alkali industry has consolidated • K.A. Steel acquisition, excluding transaction costs, is immediately accretive to earnings and cash flow, same as the Pioneer
Slide 5: Chlor Alkali Process
5 Chlor Alkali Process ECU = Electrochemical Unit; a unit of measure reflecting the chlor alkali process outputs of 1 ton of chlorine, 1.13 tons of 100% caustic soda and .03 tons of hydrogen. North American Position Percent of 2011 Revenue #2 #3 #1 Industrial #1 Merchant #1 Burner Grade 50% 10% 4% 9
Slide 6: North American Chlor Alkali Producers & Technologies
6 North American Chlor Alkali Producers & Technologies - 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 201 1 No rth A m er ica n Ch lo rin e P ro du ctio n Ca pa city by C om pa ny (S T) Other Salt-to-Bleach Mercury Membrane Diaphragm 3,895 3,421 2,140 1,929 1,060 1,002 470 341 329 275 231 216 760 I
Slide 7: Mercury Transition Plan
7 Mercury Transition Plan • Olin currently operates two mercury cell plants representing approximately 360,000 ECUs or 17% of our total capacity • By the end of 2012, Olin expects to convert 200,000 ECUs of mercury cell technology to membrane technology and will shutdown the remaining 160,000 ECUs •
Slide 8: Diverse Customer Base
8 Pulp & Paper, 20.9% Propylene Oxide, 6.6% Epichlorohydrin, 1.2% Organic Chemicals, 10.9% Inorganic Chemicals, 19.0% Water Treatment, 3.0% Exports, 17.4% Metals & Mining, 2.9% Textiles & Detergents, 9.9% Others, 8.1% Pulp & Paper, 37.0% Organic Chemicals, 16.8% Inorganic Chemicals, 10.5% Water Trea
Slide 9: Olin's Geographic Advantage
9 Olin’s Geographic Advantage Location 12/31/12 Chlorine Capacity (000s ST) McIntosh, AL 426 Diaphragm McIntosh, AL - SunBelt 352 Membrane Becancour, Quebec 297 Diaphragm 65 Membrane Niagara Falls, NY 300 Membrane Charleston, TN 200 Membrane St. Gabriel, LA 246 Membrane Henderson, NV 153 Diaphragm T
Slide 10: Industrial Bleach Initiative
10 Industrial Bleach Initiative • Olin is the leading North American bleach producer with planned capacity additions that will enable Olin to double market share by 2013 • Bleach utilizes both chlorine and caustic soda in an ECU ratio • Bleach commands a premium price over an ECU • Demand is seasona
Slide 11: Bleach Growth is a Key Objective
11 Bleach Growth is a Key Objective • Olin bleach volume delivers steady growth • Key bleach target segments include water treatment, consumer products, food, farming and pool chemicals • Current capacity to convert 14.5% of our ECUs into bleach, reaching 17.5% by year end 2012 • Increased stability
Slide 12: Hydrochloric Acid
12 Hydrochloric Acid • HCl demand has strengthened, primarily due to oil and gas exploration, resulting in Q2 2012 volumes increasing 7% over Q2 2011 levels • Demand for HCl is currently higher than supply • By-product HCl accounts for 75% of the market supply, but availability is subject to urethan
Slide 13: Growing HCl Demand
13 Growing HCl Demand North American HCl Supply • Burner acid is the only growing HCl supply source • 75% of HCl is supplied by Gulf by-product producers • By-product HCl availability is less reliable than burner • Olin is ideally positioned to serve the West & North through expanded distribution ca
Slide 14: Chlor-Alkali Outlook
14 Chlor-Alkali Outlook • Q2 2012 ECU netbacks of $575 were down $10 from Q1 2012 levels • Partial implementation of the Q2 2012 $60 caustic price announcement has occurred, Olin expects to see higher caustic pricing primarily in Q4 • Q2 2012 operating rates decreased slightly to 79% and we expect o
Slide 15: K.A. Steel Acquisition
15 • K.A. Steel is one of the largest distributors of caustic soda in North America and one of the leading bleach manufacturers in the Midwest • On August 22, 2012, we acquired privately held K.A. Steel for $328 million in cash, subject to certain post-closing adjustments • In 2011, K.A. Steel had s
Slide 16: K.A. Steel Synergies
16 K.A. Steel Synergies • Platform to expand Olin sales of industrial bleach, HCl and KOH • Optimizes use of K.A. Steel’s existing freight and logistics network to reduce Olin’s shipping expense • Provides platform to reduce freight and logistics costs • Expands presence in core caustic soda busines
Slide 17: Winchester Strategy
17 Winchester Winchester Strategy • Cost Reduction – Centerfire relocation – Once complete, we expect $30 million lower operating costs – Meaningful savings begin in 2013 • New Product Development – Continue to develop new product offerings – Maintain reputation as a new product innovator • Provide
Slide 18: Correlation Between Firearm and Ammunition Sales
18 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 U.S. Commercial Ammunition Manufacturer Shipments2 U.S. Firearms Production3 U.S. Gun Sale Background Checks (NICS)1 Data Correlations • NICS Checks & U.S. Firearms Production: +94% • U.S. Commercial Ammunition Mfr. Shipments & U.S. Firearms
Slide 19: Winchester Outlook
19 Winchester Outlook • Q2 2012 earnings slightly higher than Q2 2011 earnings • Commercial sales were strong in Q2 2012 and the commercial backlog at the end of Q2 2012 was 2 times the Q2 2011 backlog • During Q3 2012, we expect that the relocation savings will offset the costs in moving centerfire
Slide 20: Centerfire Relocation
20 Centerfire Relocation • The decision to relocate Winchester’s centerfire operations, including 1,000 jobs, was made on November 3, 2010 • The controlled relocation process is on schedule and is expected to take up to 5 years to complete, assuring high quality product is available for our customer
Slide 21: Strong Balance Sheet
21 Strong Balance Sheet • The 6/30/12 cash balance of $224 million reflects: • Normal seasonal working capital growth of $77 million; • $146 million of capital spending through June 30, 2012 associated with mercury conversion project, construction of 3 HyPure® bleach plants and the centerfire reloca
Slide 22: Profit Outlook
22 • Q2 2012 adjusted EBIDTA of $97.5 million was the highest Q2 level ever, combined with similar Q1 2012 results, leads us to believe that we have the opportunity to generate a record full year adjusted EBITDA in 2012 • Operating rates are projected to be in the low-80% range in Q3 • Bleach sales
Slide 23: Forward-Looking Statements
23 Forward-Looking Statements This presentation contains estimates of future performance, which are forward-looking statements and actual results could differ materially from those anticipated in the forward-looking statements. Some of the factors that could cause actual results to differ are descri
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