Olin Corporation · NYSE:OLN
Olin — Merrill Lynch New York City conference 2005
41 slides from Olin's conference presentation, Mar 15, 2005
Slide 1: Merrill Lynch New York City, March 16, 2005
Merrill Lynch New York City March 16, 2005
Slide 2: Attending Today
Attending Today Joseph D. Rupp – President and Chief Executive Officer John E. Fischer – VP Finance and Controller John L. McIntosh – President, Chlor Alkali Products Richard E. Koch – Vice President, Investor Relations and Public Affairs
Slide 3: Company Overview
Company Overview Olin Year Ending Dec. 2004 Revenue: $1,997 Pretax Inc. from Cont. Ops.: 79 Metals Specialty Copper-Based Products and Related Engineered Materials Revenue: $1,230 Income.: $51 Chlor Alkali North American Producer of Chlorine and Caustic Soda Revenue: $448 Income.: $83 Winchester Nor
Slide 4: Olin Corporate Strategy
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 Focused Portfolio of Businesses Global Market Leadership Operational Excellence Improve Profitability of the Metal Business Increase the Value of and
Slide 5: Investment Highlights
Investment Highlights Significant Operating Leverage Chlor Alkali Selling Prices Have Improved Sequentially and Future Increases are Expected Particularly as a Result of Higher Caustic Prices A Better Economy Improved Metals Results in 2004 over 2003 Winchester Has Additional Earnings Potential from
Slide 6: Olin 2004
Olin 2004 Sales Increased 28% vs. 2003 Metal Sales Increased Because of Stronger Shipments and Higher Copper Prices Chlor Alkali Sales Increased Due to Higher Volumes and Selling Prices Income from Continuing Operations was $0.74 Per Diluted Share in 2004 Compared to $0.01 in 2003
Slide 7: First Quarter 2005
First Quarter 2005 On February 9, 2005, We Projected Our EPS to be in $0.40 Per Diluted Share Range for 1Q05 Earnings in Chlor Alkali Expected to Increase over 4Q04 Levels Winchester and Metals Expected to Experience Seasonal Improvements over 4Q04 Levels
Slide 8: Chlor Alkali Products 2004 vs. 2003
Chlor Alkali Products 2004 vs. 2003 Demand Was Up 6% Over 2003 Levels Price Increase Announcements for Chlorine and Caustic Over the Last 4 Quarters Substantial Profit Improvement For Full Year 2004 and Into 2005
Slide 9: Olin ECU Netbacks
Olin ECU Netbacks 1Q04 300 2Q04 300 3Q04 335 4Q04 410 Olin Operating Rates Expected to Be Near Capacity (ex. Planned Outages) in 2005
Slide 10: Olin Chlor Alkali Factors
Olin Chlor Alkali Factors Olin’s Electricity Costs Have Increased Over the Last Five Years, But Have Remained Well Below Natural Gas Generated Electricity Prices High Gas Prices Impacting Other Chlor Alkali Producers Have Caused Pricing Pressures for Last 2-3 Years ($1 / MMBTU = $25-$35 / ECU)
Slide 11: Olin Has Leading Capacity Share in Eastern U.S.
Olin Has Leading Capacity Share in Eastern U.S. Total Industry Capacity Bayer 2% Mexichem Other 2% 8% Georgia Gulf 3% Dow Vulcan 32% 5% Pioneer 5% Formosa 6% Olin 8% Occidental PPG 17% 12% 4th Overall in U.S. Capacity Largest Producer East of the Mississippi River Olin Has 1.22 Million ECU Capacity
Slide 12: North America 2004 Chlorine Demand
North America 2004 Chlorine Demand Inorganics 6% Others Chlorinated Inter. Water 14% 9% Treatment 5% Pulp & Paper 1% Vinyls Organics 39% 26% United States 92% Mexico 3% Canada 5% Domestic Demand = 13.3 Million Metric Tons Houston London Singapore Dubai Prepared exclusively for Olin
Slide 13: North America Chlorine Demand
North America Chlorine Demand Million Metric Tons 15 12 9 6 3 0 99 00 01 02 03 04 05 06 07 08 09 %AAGR 2004-09 Vinyls -0.6 Organics 2.4 Chlorinated Inter. -0.4 Inorganics -0.1 Pulp & Paper -4.6 Water Treatment 1.4 Others 1.2 %AAGR Demand 0.6% Houston London Singapore Dubai Prepared exclusively for O
Slide 14: North America 2004 Caustic Soda Demand
North America 2004 Caustic Soda Demand Others Water Treatment 3% 12% Pulp & Paper Inorganics 25% 22% Alumina 4% Organics Soaps/Detergents/ 24% Textiles 10% United States 86% Mexico 4% Canada 10% Domestic Demand = 13.5 Million Dry Metric Tons Houston London Singapore Dubai Prepared exclusively for Ol
Slide 15: North America Caustic Soda Demand
North America Caustic Soda Demand Million Dry Metric Tons 15 12 9 6 3 0 99 00 01 02 03 04 05 06 07 08 09 %AAGR 2004-09 Pulp & Paper 1.0 Alumina -1.3 Organics 1.8 Soaps/Deterg./Textiles 0.7 Inorganics 1.2 Water Treatment 1.7 Others 1.6 %AAGR Demand 1.2% Houston London Singapore Dubai Prepared exclusi
Slide 16: North America Chlor Alkali Forecast
North America Chlor Alkali Forecast North America Chlor Alkali Capacity Reductions Since 2000 Short Company Location Tons as Chlorine Dow Plaquemine, LA 385,000 Oxy Vinyls LP Deer Park, TX 382,800 Pioneer Tacoma, WA 226,600 Atofina Portland, OR 224,400 La Roche Gramercy, LA 198,000 Dow Ft. Saskatche
Slide 17: CMAI Estimates of ECU Prices
CMAI Estimates of ECU Prices* (For Chlorine to Chemicals and Diaphragm Grade Caustic) $700 $600 $500 $400 $300 $200 $100 $0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 * ECU Prices Before Freight and Other Allowances
Slide 18: 2004 Industry Highlights
2004 Industry Highlights Chlorine And Caustic Demand Grew 6.0% Over 2003 Levels Improving Operating Rates To Near Capacity ECU Prices Have Increased To Record Levels By Fourth Quarter Of 2004 The Chlor-alkali Business Cycle Is Approaching The Next Peak 2005/2006. The Last Cycle Peak Was 1995/1996, S
Slide 19: Olin Chlor Alkali Products
Olin Chlor Alkali Products Products Chlorine / Caustic Soda Sodium Hydrosulfite Hydrochloric Acid and Sodium Hypochlorite Potassium Hydroxide (KOH) End Uses Pulp & paper processing, chemical manufacturing, water purification, manufacture of vinyl chloride, bleach, swimming pool chemicals & urethane
Slide 20: Olin's Chlor Alkali Strategy
Olin’s Chlor Alkali Strategy Be the Preferred Supplier to Non-Integrated Chlor Alkali Customers Continue to Drive Cost Improvements Through Manufacturing and Logistic Optimization Continue Our Partnership Philosophy With Our Customers Significant Opportunities to Increase the Value of the Business a
Slide 21: 2004 / 2005 Price Increase Announcements
2004 / 2005 Price Increase Announcements in $ per ton Feb. 2004: Chlorine $75 Apr.: Caustic $50 May: Chlorine $20; Caustic $45 July: Caustic $65 Sept.: Chlorine $20; Caustic $45 Nov.: Chlorine $20; Caustic $50 Feb. 2005: Chlorine $20; Caustic $40 Total Chlorine: $155; Caustic $295 *Caustic Price Inc
Slide 22: Impact Of High Chlorine Prices On Chlor Alkali Profitability
Impact Of High Chlorine Prices On Chlor Alkali Profitability Chlorine Buyers are Highly Concentrated Some Large Chlorine Buyers Have Contractual Caps and /or Discounts Which Dampen Impact of Price Increases at High End of Contract Range Chlorine Contracts are Multi-Year and Recognize Cycle Pricing T
Slide 23: Caustic Price Increases Are A Key to Higher ECU Values
Caustic Price Increases Are A Key to Higher ECU Values Historically, Olin’s Chlor Alkali Business Has Seen Peak Earnings During Times of High Caustic Prices Caustic Customers are Smaller and More Numerous Caustic Demand Improvement Normally Lags Chlorine by Six Months Olin Sells 10% More Caustic Tha
Slide 24: Metals
Metals Olin is Leading Manufacturer of Copper Alloy Strip and Brass Rod in the U.S. Large Size Provides Economies of Scale and Manufacturing Efficiencies Olin Possesses Leading Technology Position Olin is the Leading Copper Based Sheet and Strip Distributor in the U.S.
Slide 25: Metals
Metals Earnings Leverage as a Result of Cost Cutting and Capacity Rationalization As the Following Slides Show, 2001, 2002 and 2003 Were Well Below Historical Consumption In 2004, Demand Increased Over 2003 for Both Sheet and Rod Products by 13% and 8%, Respectively
Slide 26: U.S. Strip Consumption
U.S. Strip Consumption In MM Pounds 1800 1600 1400 1200 1000 800 600 400 200 0 1998 1999 2000 2001 2002 2003
Slide 27: U.S. Brass Rod Consumption
U.S. Brass Rod Consumption In MM Pounds 1200 1000 800 600 400 200 0 1998 1999 2000 2001 2002 2003 2004
Slide 28: 2004 Metals Income Increased vs. 2003
2004 Metals Income Increased vs. 2003 Sales Increased 44% From $855 Million in 2003 to $1.230 Billion in 2004 Shipment Volumes Increased 11% Higher Copper Prices and Product Mix Accounted for 33% of Increase Income Increased From $9 Million in 2003 to $51 Million in 2004 Shipments to Automotive Segm
Slide 29: Olin First Quarter 2005 Demand Expectations
Olin First Quarter 2005 Demand Expectations Strip Volumes are Estimated to Increase 15% from 4Q04 but be 5% Below 1Q04 1Q05 below 1Q04 Due to Weakness in Automotive and Certain Electronic Market Segments. Rod Volumes Estimated to Increase 15% from 4Q04 and Up 5% from 1Q04 Continued Strength In Const
Slide 30: Winchester Products
Winchester Products Products Winchester ® sporting ammunition — shot-shells, small caliber centerfire & rimfire ammunition Small caliber military ammunition Industrial products — 8 gauge loads & powder-actuated tool loads End Uses Hunters & recreational shooters, law enforcement agencies Infantry an
Slide 31: Winchester 2004 vs. 2003
Winchester 2004 vs. 2003 Sales Up 5% From $303 Million in 2003 to $319 Million in 2004 Primarily Due to Higher Commercial Demand Income Was $21.9 Million in 2004 Compared to $21.6 Million in 2003 Higher Commercial Sales Offset in Part by Increased Commodity Costs
Slide 32: Rimfire
Rimfire To Improve Its Competitive Position, Winchester is Relocating Its Rimfire Manufacturing Operation from East Alton to Oxford, MS. Expect New Facility to be Operational in Spring 2005
Slide 33: Winchester's Military Business Is Growing
Winchester’s Military Business Is Growing In May 2004, Winchester Began Deliveries Of 5.56MM M855 Ball Ammunition As Part Of A $18 Million Contract. Winchester Was Awarded A $6.5 Million Contract By The US Army To Produce 7.62MM M80 Ball Linked Ammunition With Deliveries Beginning In 2005 And Contin
Slide 34: Winchester Potential Second Source for US Army
Winchester Potential Second Source for US Army The Contract Is Being Competitively Bid Olin’s Winchester Division Is Bidding As Part Of The General Dynamics Team Second Source Contract Could Generate $150 Million Of Revenue Per Year According to Military Estimates Contract Award Expected in June 200
Slide 35: Financial Highlights
Financial Highlights In February, 2004 Issued $178 Million of Common Stock to Strengthen Balance Sheet and Increase Financial Flexibility $ 125 Million Pension Contribution Made in February 2004 Additional $ 43 Million Voluntary Contribution in September 2004 Repaid $ 27 Million of Debt in 2004 and
Slide 36: Financial Highlights (continued)
Financial Highlights (continued) 2005 Pension Expense Expected to Increase by $16 Million Over 2004 Projected 2005 Effective Tax Rate of 39% Commitment to Investment Grade Credit Rating Capital Spending Levels Expected to Be in Line With Depreciation in
Slide 37: Cap. Ex. and D&A
Cap. Ex. and D&A $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 ($ MM) 87 88 80 81 82 76 78 78 78 73 74 73 73 65 55 55 41 1997 1998 1999 2000 2001 2002 2003 2004 2005E Capital Expenditures D&A
Slide 38: Investment Rationale
Investment Rationale Potential for Improved Performance Based On: Higher Expected ECU Prices Metals Results Will Depend on Demand In Key Sectors of the Economy Such as Automotive, Electronics, Coinage, Building Products, Ammunition, and Industrial Construction Winchester Participation in Increased M
Slide 39: Corporate Office Moves
Corporate Office Moves Moved Norwalk, CT Headquarters to Clayton, MO at the End of 2004 Decision Driven By Organizational, Strategic, Economic Reasons One-time Costs of Approximately $12 Million; Annualized Savings of about $6 Million
Slide 40: Forward-Looking Statements
Forward-Looking Statements This presentation contains estimates of future performance, which are forward-looking statements and results could differ materially from those anticipated in the forward-looking statements. Some of the factors that could cause actual results to differ are described in the
Slide 41: Proud Heritage ... Promising Future
Proud Heritage … Promising Future