OLN

• Merger with Huntsman

  • Olin announced a planned merger with Huntsman in Q2 2026, which will create a vertically integrated, North America-focused chemical leader with more than $12 billion in annual sales, with $400 million in projected synergies.
  • The company has filed its definitive proxy, and the special shareholder meeting is scheduled for August 25, 2026, with shareholder voting already underway. Pre-closing integration planning will begin in Q3 2026, and closing is still expected in the first half of 2027.
  • Management reports strong shareholder support for the transaction following investor roadshows.

• Cost Reduction Initiatives (Beyond 250)

  • The Beyond 250 structural cost reduction program is on track to deliver more than $100 million in incremental structural cost savings in 2026, and management is increasingly confident the program will exceed its $250 million total target by 2028.
  • For Winchester specifically, the company is on track to deliver its committed $30 million in annual cost cuts, and is likely to exceed this target after additional efficiency work at the Lake City, Missouri facility.

• Financial Position and Capital Allocation

  • Olin ended Q2 2026 with $1.2 billion in available liquidity, and has no bond maturities before 2029, maintaining a well-structured debt profile.
  • The company's core capital allocation priorities are: maintaining safe, reliable asset operations with 2026 capital spending targeted at ~$200 million; continuing uninterrupted quarterly dividend payments; full-year 2026 working capital that is essentially flat excluding ~$195 million in legacy Shintech litigation payments; and 2026 is expected to be a cash-free tax year +/- $20 million.
  • Any excess free cash flow will be prioritized for debt reduction to strengthen the balance sheet.

• Operational Updates

  • Olin achieved record safety performance across the company in the first half of 2026, and is streamlining work processes, updating asset reliability roadmaps, and leveraging digital tools and AI to identify inefficiencies, reduce costs, and improve asset reliability.

• Overall adjusted EBITDA for Q3 2026 is expected to remain in the range of $160 to $200 million, with chemicals adjusted EBITDA projected to be relatively flat sequentially from Q2, and modest earnings improvement at Winchester partially offset by higher corporate costs.
• Domestic caustic soda pricing is expected to strengthen in Q3 2026, but lower export pricing will largely offset improved export volumes for caustic soda and EDC. Product supply is expected to tighten in Q4 2026 due to persistent high feedstock/energy costs and planned industry shutdowns.
• For epoxy, stable volumes and improved product mix will benefit Q3 results, but these gains will be more than offset by higher FIFO costs in Europe; epoxy will still deliver positive adjusted EBITDA in Q3 2026, with overall segment earnings projected to be slightly lower sequentially than Q2.
• Winchester Q3 earnings are expected to improve sequentially, driven by higher commercial volumes and pricing from the fall hunting season, partially offset by higher metals costs.
• Olin expects to end 2026 with a net leverage ratio of approximately 4.5x, following $195 million in total legacy Shintech litigation payments ($93 million paid in H1 2026, $100 million remaining to be paid in H2 2026).

1. Chloralkali Products and Vinyl: Early Q2 saw Iran conflict-driven supply chain disruptions that raised product prices; export pricing for caustic soda and EDC trended lower through the quarter but remained above pre-conflict levels. An unplanned May outage at the Freeport, Texas BCM facility cut Q2 adjusted EBITDA by $40 million, and is expected to reduce Q3 adjusted EBITDA by an additional $20 million, with the plant operating at reduced rates through Q3. Merchant chlorine sales saw seasonal improvement supported by demand from water treatment, refrigerant, and other derivative end markets. Domestic caustic pricing is projected to strengthen in Q3.
2. Epoxy: The segment delivered its best results in over three years, returning to positive earnings. Price increases were implemented to offset rising raw material and transportation costs driven by the Iran conflict. U.S. epoxy demand saw moderate seasonal improvement, while European demand remained flat. Structural cost reduction initiatives (including new supply agreements in Stade, Germany and the Guarujá, Brazil plant closure) have reduced annual structural costs by more than $50 million.
3. Winchester: Monthly commercial ammunition sales improved year-over-year as consumer demand strengthens, and pricing initiatives to offset rising copper and brass costs have driven year-over-year adjusted EBITDA improvement. Domestic and international military ammunition and projectile sales remain strong. The segment maintains disciplined working capital and inventory management amid a growing commercial backlog.

• Geopolitical uncertainty from the ongoing Iran conflict creates volatility in global chemical supply chains, feedstock/energy costs, and customer buying patterns, making demand and pricing dynamics hard to predict.
• European epoxy demand remains weak, constrained by high energy costs and broader economic growth headwinds from regional policy, with no near-term improvement expected.
• Underlying demand from key end markets including housing and automotive remains stable but has not yet recovered, keeping overall demand growth muted.
• The unplanned Freeport VCM outage will continue to negatively impact results through Q3 2026, with a $20 million expected hit to adjusted EBITDA.

Q: What has been the biggest impact of the Iran conflict on Olin, and what are the implications if the conflict drags out for months?

A: The largest impact was seen in early Q2, when prices spiked and supply disruption concerns grew, before markets rebalanced through the end of the quarter. Global production costs for non-U.S. producers have risen permanently, putting a higher floor under prices. Export prices for caustic soda and EDC have softened temporarily as the market digests excess production added during the price spike, but markets are expected to rebalance in Q3 and tighten further in Q4 amid planned capacity outages and stable underlying demand.

Q: What are your outlook for chlorovinyl supply-demand, including the return of Middle East capacity, European natural gas price impacts, Asian destocking, and potential future restocking?

A: The return of Middle East capacity is not a major near-term concern; the bigger factor is reduced operating rates in China that will support balanced markets through the end of 2026, combined with planned outages in North America. European operating rates spiked in Q2 but have already fallen back as prices normalized. Customers are currently drawing down inventories built ahead of potential disruptions, so a restocking cycle could lift apparent demand later, though underlying housing and automotive demand remains stable not recovering. These volatile dynamics lead to the wide Q3 adjusted EBITDA guidance range provided.

Q: How should investors think about the 4.5x year-end leverage target, and what does it imply for full-year 2026 EBITDA?

A: Deleveraging remains a top priority for Olin even with the pending Huntsman merger, and the company is heavily focused on cash generation and working capital discipline. Olin does not provide full-year EBITDA guidance, but confirms that net debt will rise year-over-year due to the $195 million in legacy litigation payments, resulting in a 4.5x leverage ratio by year-end. Olin generates positive levered free cash flow even at current low earnings levels, after covering dividends, capital spending, and interest expenses.

Q: What drove the seasonal improvement in U.S. epoxy demand in Q2, will it continue, and what is needed for European demand to improve?

A: The U.S. saw only moderate seasonal improvement, below normal levels, driven by the spring construction season supporting coatings demand, and this trend is expected to continue into Q3. For European demand to improve, sustained improvement in housing and industrial activity is required, but high energy costs and restrictive regional economic policies are expected to keep demand flat in the near term. Olin is relying on its own cost reduction actions rather than market growth to improve European results.