This is Matt Reustle recording in October 2023, and today we are breaking down Olin Corporation.
Olin is a key player in industrial chemicals but many of those chemicals are used in products that we encounter on a day-to-day basis. To break down Olin, I’m joined by Yinan Zhao from Pzena Investment Management.
Together we cover the chlor-alkali market, what it means to be the lowest-cost producer of a given commodity, and how Olin has shifted its business model and its operational model to help sustain earnings through cycles. Please enjoy this breakdown of Olin Corp.
Show Notes
(00:00:00) – Introduction
(00:01:33) – (First question) – An elevator pitch for Olin
(00:02:56) – Investors looking at DuPont also look at Olin from a subsector perspective
(00:03:55) – A brief history of Olin’s business
(00:07:40) – The process of creating Chloralkali and its uses
(00:11:25) – The similarities and differences when comparing the crude oil refining process and the creation of Chloralkali
(00:12:21) – The use of Olin’s chlorine in residential public pools
(00:12:48) – The breakdown of manufacturing operations of Olin, control versus outsourcing
(00:18:14) – A snapshot of the revenue percentages of Olin’s businesses
(00:19:13) – The percentage range of Olin’s cyclical commodities
(00:20:06) – The end markets that Olin integrates itself in
(00:22:47) – A background on CEO Scott Sutton and the shift in operating philosophy
(00:29:09) – Olin’s confidence in its new optimization strategies
(00:33:49) – The downside risk to Olin’s new business model
(00:35:53) – A breakdown of Olin’s CapEx spending
(00:37:17) – The margin profile and EBITDA growth, historically and how it looks now
(00:38:20) – The difficulties in forecasting and similarities with oil refinery volatility
(00:40:02) – Market futures activity and hedging
(00:41:49) – The Winchester business and its position within the overall Olin pie
(00:43:49) – The announcement to the departure of Scott Sutton and the risks posed
(00:48:11) – Other potential risks to Olin’s business moving forward
(00:49:11) – A look at Olin’s ESG ranking
(00:51:35) – Valuing the business and what investors might think about Olin
(00:53:12) – Lessons learned from researching Olin