Olin Corporation Stock

Good morning, and welcome to Olin Corporation's Third Quarter 2026 Earnings Conference Call [Operator Instructions] Following today's brief opening comments, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being rewarded. I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve.

Thank you, operator. Good morning, everyone. We appreciate you joining us today to review Olin's third quarter 2026 results. Please keep in mind that today's discussion, together with the associated slides as well as the question-and-answer session that follows, will include statements regarding estimates or expectations of future performance. Please note these are forward-looking statements and that actual results could differ materially from those projected.

Some of the factors that could cause actual results to differ from our projections are described without limitations in the Risk Factors section of our most recent Form 10-K and in yesterday's third quarter earnings press release. A copy of today's transcript and slides will be available on our website in the Investors section under past events. Our earnings press release and related financial data and information are available under press releases. With me this morning are Ken Lane, Olin's President and CEO, and and Todd Slater, Olin's CFO. We'll start with some prepared remarks, then we look forward to taking your questions. Let me now turn the call over to Olin's President and CEO, Ken Lane.

Thanks, Steve, and thank you to everyone joining us today. We appreciate your interest in Olin. Let's start on Slide 3 with a high-level review of the third quarter. The quarter reflected much of what we discussed on our last call. Each business remained focused on serving customers, maintaining commercial discipline, reducing structural costs and generating cash and what continues to be a very dynamic environment. During the quarter, our team made progress in several important areas. We completed our work at the Freeport site, returning our BCM assets to normal operations in mid-September as planned. .

Caustic soda market remained resilient and Olin's commercial team maximized our third quarter caustic value against a turbulent export market. Our Epoxy business continues to benefit from our self-help actions. Our formulated solutions growth and our commitment to support local customers seeking secure and reliable supply in both the U.S. and Europe. Commercial ammunition demand at Winchester has improved year-over-year, and our military business continues to gain momentum with new contract awards, recognizing our strong performance as an essential supplier to the U.S. war fighter. Finally, we stepped up our integration planning for the Olin Huntsman merger as regulatory approvals accelerate.

Our day-to-day focus remains unchanged as we prioritize safe, reliable and consistent execution across the company. Turning to Slide 4, let me share an update on our planned merger with Huntsman. Our August shareholder meeting returned overwhelming support for this transaction. providing a clear mandate while also passing a threshold of support to preserve the low-interest Huntsman bonds. We continue to make good progress toward closing. We've cleared the Hart-Scott-Rodino waiting period here in the United States, and we've received regulatory approval in several other key jurisdictions. Reviews continue in the remaining regions, including Europe and China, and with the progress we have seen so far, we now expect to close in the first quarter of 2027.

Our immediate priority is being ready to execute on day one. Under Todd's leadership, we've accelerated our preclosing integration planning to align with the first quarter 2027 closing. We remain confident in our ability to deliver more than $400 million of cost synergies and integration benefits and the planning we're doing now will help us make a fast start after closing. I think it's important to understand how we're approaching integration. We're building a new company with an industry-leading globally advantaged asset base and a highly talented team. We're designing our organization based on industry-leading benchmarks, building a lean and efficient company focused on the essential operations that create value for our customers shareholders and team members.

Our organizational design will be data-driven with clear lines of accountability and incentive programs that drive results. We'll be sharing more about Owen Huntsman in the coming weeks. In the meantime, we're announcing today that the ticker symbol for Olin Huntsman will be OHN following closing. Now let's turn to Slide 5 for a closer look at our chlor-alkali products and Vinyls third quarter performance. As expected, we resumed normal operations at our Freeport BCM facility. Reduced operating rates resulted in approximately $30 million of negative impact. While we sold more EDC during the quarter, EDC values have moderated from second quarter but remain above pre-conflict levels. Domestic caustic soda prices improved slightly on similar volumes in the second quarter. Export pricing was significantly pressured by excess Chinese production.

Boring volume was lower due to customer maintenance activity, while water treatment was seasonally strong. With industry shutdowns, seasonally slower vinyls demand and increasing global cost of energy, feedstocks and freight, caustic markets are tightening as we come to the end of the year. We've announced price increases and expect to realize those in the first quarter of 2027. Turning to Slide 6. Let's review our Epoxy results. Olin's epoxy business continues to improve, supported by our self-help actions and margin management that is critical as we see significant increases in feedstock costs. Remaining focused on what we can control, we materially improved the cost structure of the business and we continue to leverage Olin's position as a reliable, vertically integrated global supplier to customers in both the U.S. and Europe.

We also continue to grow our higher-value formulated solutions portfolio. particularly in applications across electronics, composites and coatings. Oil price volatility has caused dramatic swings in benzene and propylene prices. Our Epoxy team has acted quickly to offset that with announced price increases. Fuel surcharges have also been implemented across all regions and shipping modes to mitigate rising diesel and transportation costs. Europe is now considering safeguard protections to shield its composites value chain from subsidized Asian overcapacity. If successful, this initiative will benefit a broad group of composite input materials including epoxy resins and related systems, which are all essential to critical industries, including automotive, wind energy, aerospace and defense.

It is critical that the European Union act decisively to seize this momentum and swiftly establish provisional measures. Olin has provided support throughout this process, and we'll continue to do so. We're building a more resilient business by focusing on structural cost actions, commercial discipline, reliable supply and increased participation in high-value end uses. Our upcoming merger with Huntsman will accelerate all of these. Now let's take a look at Winchester on Slide 7. Out the door commercial ammunition demand continued to improve on a year-over-year basis during the third quarter. Year-to-date, September Nick's background checks for firearm purchases were up year-over-year for the first time since 2020.

Our commercial order backlog continues to grow year-over-year as we remain very disciplined around value chain inventories, continuing our make-to-demand approach. As a result of the Winchester team's actions, the balance between channel inventories, consumer takeaway and our own production is much healthier today than it was this time last year. Our military business continues to perform well. Winchester was awarded more than $1 billion in contracts during the quarter. Approximately $600 million of which will be used to equip the new Lake City 6.8 millimeter ammunition facility. This month, Winchester delivered its first shipment of Lake City produced 6.8 millimeter rounds to the U.S. military. Our interim production capacity is expected to scale by a factor of 10 by the completion of the project as the new manufacturing facility is built out. These are the first rounds produced on U.S. government-owned assets that meet the full requirements of the new 6.8 millimeter round demonstrating the industry-leading design, engineering and manufacturing capabilities of our Winchester team.

The Army also renewed our 5-year second source supply contract with an initial delivery valued at $50 million over the next 12 months. This contract covers ammunition we produce for the military from our Oxford, Mississippi and East Alton, Illinois plants. These actions reinforce the U.S. military strong confidence in Winchester. I'll now turn the call over to Todd for a look at our financial highlights.

Thanks, Ken. Turning to Slide 8, I'll review our working capital, liquidity and financial position. Earlier this week, Olin executed a new credit agreement to support the combined company following our merger with Huntsman, backed by strong commitments from our combined relationship bank group, the agreement will expand liquidity and financial flexibility for Olin Huntsman at closing. Working capital increased during the first 9 months of 2026, reflecting our normal seasonal build and payments against previously accrued legacy litigation reserves. During 2026, Olin paid approximately $114 million to Shintech related to legacy litigation obligations. We do not expect further payments this year. We expect a seasonal reduction in working capital in the fourth quarter, supported by continued inventory and receivables management. resulting in year-end working capital approximately in line with 2025 levels, excluding the impact of legacy litigation payments.

We expect year-end net debt to be higher than year-end 2025, reflecting legacy litigation payments and merger-related costs. We expect year-end leverage to be approximately 5x or slightly higher. The end of the quarter with $1.3 billion of available liquidity with no restrictions on the undrawn portion of our revolving credit facility. Our capital allocation priorities remain unchanged. We continue to target 2026 capital spending of approximately $200 million, with investments focused on safe, reliable and efficient operation of our assets. We expect to continue our long history of uninterrupted quarterly dividend payments with our next dividend, marking 100 years of consecutive quarterly dividend payments.

Finally, we remain committed to preserving liquidity and maintaining financial flexibility with excess cash flow to be used to reduce our outstanding debt. Olin 250 continues to generate strong momentum as we remain on track to deliver in the range of $110 million to $120 million of incremental structural cost reductions in 2026. And annual savings expected to surpass our original $250 million target by 2028. This year, you have clearly seen the benefits from structural cost reductions in our Epoxy business. However, in our chlor-alkali business, market and operating headwinds have offset the earnings benefit of these structural cost reductions. Our focus remains on cash generation, structural cost reductions and disciplined capital allocation as we prepare for our merger with Huntsman. With that, Ken, I'll turn the call back to you.

Thanks, Todd. We'll finish with Slide 9 and our outlook for the fourth quarter. We expect adjusted EBITDA to be in the range of $80 million to $100 million for a full year 2026 adjusted EBITDA of approximately $550 million to $570 million. In our CAPV business, we expect sequentially higher maintenance turnaround costs of approximately $25 million with sequentially lower domestic caustic soda pricing and seasonally lower demand for water treatment and construction. In addition, we expect to see year-end customer destocking at higher levels than normal. As we transition to 2027, we're seeing a firming caustic soda market with lower production aligned to seasonal chlorine demand and Asian exporters facing steep increases in freight costs as refined fuel products compete regionally for vessel availability.

This has resulted in freight cost increases of more than $80 to $100 per ton for Asian caustic exports to Europe and Latin America, widening the U.S. Gulf Coast arbitrage and advantaging North American exporters. In Epoxy, we faced a $30 million sequential increase in turnaround costs. Many of these maintenance activities occur once every 5 years. In contrast, 2027 is expected to that have been implemented during 2026. At Winchester, seasonally lower demand and sequentially higher copper costs will impact fourth quarter results, weighing upon otherwise constructive commercial demand. Commercial discipline will continue to be a high priority as we focus on improving margins and cash flow. We expect our defense business to be sequentially higher.

To wrap up, we are highly focused on improving our results in the face of a challenging environment, but we're not standing still. We're operating with discipline, strengthening each of our businesses and moving quickly to capture opportunities. With improved asset reliability beyond 250 structural cost savings building positive momentum at Winchester and our Olin Huntsman integration to come, we are excited about the future. Our priorities are clear. Our team is energized, and we're focused on execution and creating meaningful value for our shareholders. Consistent with these priorities is the 100th year of consecutive quarterly dividends expected to be paid in the fourth quarter. Thank you for your continued interest in Olin. Operator, we're now ready to begin Q&A.

[Operator Instructions] The first question will come from Frank Mitsch with Fermium Research.

I wanted to drill into caustic soda. I think you indicated in the press release that you saw higher pricing, I believe that was domestic, but you saw lower export pricing. And then as you -- your Slide 15, you indicated that caustic pricing was actually down. Can you tell us what's been going on with caustic soda pricing within your system and what your expectations are? .

For caustic soda, it really is a global story. Domestically, we have seen prices improve slightly versus the second quarter. But you know the challenges in the export market are related to not as much demand as it is related to the high volume of exports that we see coming out of China this year. They really -- for the full year, they've stepped up the amount of caustic exports coming out of China, and that has continued. Now we're starting to see some challenges with that because of freight costs in Asia that are really related to what's going on in the Middle East. So that advantage for U.S. Gulf Coast caustic is really coming back as freight costs remain high. And I think if you sort of track and watch what's going to happen in the freight markets, you'll probably be able to see what's happening around caustic because we're coming into a part of the season that is normally lower production, demand is usually seasonally slower now as well.

So we will see some tightening of markets because the liquidity in the market is not what it typically is based on the freight issues that we're seeing.

The next question will come from Josh Spector with UBS.

I was wondering if you could talk about your latest thoughts around how you deal with the Shintech contract in 2030, just assuming if you might need to build some PVC capacity, you might need to start that in the next year or so or at least get partners lined up. So any latest thoughts there would be appreciated. .

Josh. Listen, our strategy around Vinyls has not changed. We have said all along that we -- we believe that the best path forward is for both Shintech and Olin to continue to work together. If that doesn't turn out to be the case, then we do have other options that we're looking at. That includes selling VCM to other parties. It includes potentially doing something in PVC. But we are not at a point now where we're ready to make any decision or any announcements. I'd say the chess pieces on the table are the same as they were even a year ago. I would expect that we will be making some sort of a more firm decision middle of next year to -- by the end of the third quarter, I think I'll be able to give you a better update on what we're going to be doing. But that fits, that timing fits very well with every option that we're looking at in terms of being able to execute it.

And once we know more, I'll be sure and give you an update.

Next question will come from Hassan Ahmed with Alembic Global.

A question around synergies. I know you guys said that you would give more details later on. But I mean it just seems that the $400 million target that you guys gave, I mean, you're talking about increased confidence around that. So I'm just trying to figure out what's driving that? Have you seen more opportunities? Can we actually exceed that $400 million target as well? .

Hassan, yes, as you can imagine, there's only so much that we can do prior to closing. We're able to do a little bit more through clean teams in terms of looking at the cost structures and where we see opportunities for streamlining and making the organization more efficient after closing. But 1 thing we have not really looked at it all still is any opportunities around revenue synergies. So what I can tell you is that what we see is in terms of just the fixed costs and the overhead and the efficiency improvements that we see,

I have a very high level of confidence in the $300 million Remember, there was $100 million that's related to chlorine supply that kicks in, in 2030. So to me, that's going to be there. It's just a matter of time. But the -- we will certainly -- on the first earnings call after closing, being able to give you a little bit more details just in terms of how we see that phasing over time and how long it's going to take to be able to achieve that on a more, let's say, ratable or quarterly basis. We've given you some direction on an annual basis. But I think what I want to be able to do is explain a little bit more about how quickly in the short term, we'll be able to deliver that.

The teams are working extremely well together. And just to give you 1 example, we've done some cultural surveys between Huntsman and Olin. And when you look at the results, what it shows is culturally, we're very similar. That is -- that is encouraging to me that as we bring the companies together, we're going to be able to hit the ground running. Todd, I don't know if you want to add anything to that?

Ken, every time I talk about the synergies you [indiscernible] the teams candidly in the pre-closing integration phase are working well together, and are really working on planning for day 1 and day 1 readiness and hit the ground running for synergy realization. .

The next question will come from Alexi Yefremov with Barclays.

Could you provide a year-over-year bridge for your EBITDA in chlorovinyls? It looks like you're profit indexes up your maintenance is a little bit up as well, but are there any other major factors that explain what's happening year-over-year?

Yes. Welcome back. Good to see you or good to hear you, I should say. If you look at chlorovinyl One of the things that we had last year that's not recurring is a 45 benefit in the third quarter of 2025. We don't have that again this year.

Sorry, go ahead, Todd .

Yes. No problem. I mean Alexi, 45, the change in the hydrogen tax credit was roughly a little over $25 million year-over-year penalty. And you know last year was a cumulative benefit, this year was about $5 million a quarter. We had talked earlier in the year in that $4 million to $5 million range a quarter. So that's what you see. The other thing is you do know we have BCM issue, where we had to reduce rates really during almost all of the third quarter this year. So that was roughly a $32 million headwind year-over-year.

So more of a couple of one-timers that map some of the other things you talked about. .

The next question will come from Jeff Zekauskas with JPMorgan.

Do you expect your chlorovinyl utilization rates to change very much from the third quarter to the fourth quarter.

Jeff. I would not expect the operating rates to change significantly. We've got some downtime coming up in the fourth quarter. We continue to operate below the industry what you see reported for industry utilization rates. Part of that is related to the discipline that we're going to continue to show around operating our assets and maintaining values, but it's also related to some planned outages and unplanned outages that are occurring either at the beginning of the quarter, and we've now worked out or turnarounds that have slipped into Q4. But I don't see any significant change in the utilization rate for Chlorovinyls in the fourth quarter.

The next question will come from Salvator Tiano with KeyBanc Capital Markets.

Yes. Thank you very much. I want to ask a couple of things. Number 1 is as we think about the VCM outage, if I understood correctly, you said that the plan was still out most of Q3 and was still over $30 million impact. So is it fair to assume that this becomes kind of a $30 million tailwind in Q4, perhaps adjusted for seasonality with additional upside in Q1, and secondly, in your outlook, I think you're the only company so far talking about a more intense than usual destocking in Q4. Every other company has gone out of their way to say the expected cultonality. And I wonder, is this conservatism on your end? Or is it simply that you are actually seeing some of your chemical chains, more severely stock you have line of sight to that?

Listen, I'm going to start with the destocking question, and then I'll let Todd take the first part of your question there on the VCM. Our view is what we have seen as we've gone through this trough, and you can really look at some of the data, Q4 seasonality is more accentuated than it has been in the past. So you can call it destocking, and you can call it seasonality, call it whatever you want. I think the reality is that the volatility in the fourth quarter is higher now than it has been in prior years. And we're not going to ignore that. I mean, I think it's prudent to make sure we reflect that in our outlook, and that's what we've done. .

And Sal, as you think about the VCM, talked about it coming up mid-September. So yes, it was really out at reduced rates for the virtually the whole quarter. So that $32 million, yes, that's a tailwind in Q4. But as we -- as you see through our slides, chlor-alkali does have a roughly $25 million headwind going the other way on higher turnaround costs between Q3 and Q4. And just as a note, we would expect turnaround costs in the first quarter to be high as well in chlor-alkali.

The next question will come from Patrick Cunningham with Citi.

Just maybe a couple of questions on Winchester. It seems like you've seen some positive leading indicators. You talked about better channel health and commercial. As we look to the next 12 months, are there any other demand signals you're seeing? Do you expect to have a better platform for price? And if you layer on the continued robust military growth I guess what sort of earnings outlook do you have over the next 12 months or so?

Patrick. Yes, listen, the Winchester team has really done a great job dealing with some really strong headwinds here, mainly things related to costs for this year, mainly in metals, propellents not as much this year, but metals has been a real headwind. And it's not just copper. It's zinc, it's led. It's pretty much every commodity that they buy. And they have been steadily pushing prices through really, we've just been keeping up with those -- with that metals inflation. And we're probably just looking at where copper is going in the fourth quarter. We're going to be looking at doing something as we think about the new year, we've certainly got to respond to the copper prices that we've seen recently.

We don't see anything in the short term that I think would give us pause in terms of thinking that it's going to be reversed. So we've got to stay on top of that, and the team is you've seen the margins for Winchester. They have steadily improved, but they're still pretty significantly behind where they are historically. And so we've got to stay focused on doing everything we can to help ourselves, and that includes operating our assets well. One of the things that Brett and his team are doing is getting really stuck into the Beyond 250 program and looking first at Lake City and understanding how we can become more efficient in operating that facility because every cost that we have, we've got to put under scrutiny.

The military demand is going to continue to be strong, and that's very good to see. But at the end of the day, the commercial business is what really matters for us in terms of short-term earnings and making sure that we can get the margins up there is my priority for right now.

The next question will come from Kevin McCarthy with Vertical Research.

Can I welcome your comments on the subject of freight cost inflation and whether that is a net benefit or headwind to Olin as a whole. It sounds like as it relates to caustic maybe it's helpful to the extent that it would insulate you from competition, but I'm not sure about the impact on other parts of the company. So I would certainly welcome your broader view there. .

Great question, Kevin. Thanks. Listen, freight costs definitely helped us in the second quarter because that's what supported pricing, but I think we've now seen that. That is in the market. And I'm really talking more specifically now about international trade related to things like caustic and ABC. Those freight rates are also backing up, and they will start impacting us as well. So it's just a matter of time before those costs start to creep into our freight lanes. If you think about other areas, though, where we're focusing on freight and other modes of transportation like epoxy, I mentioned this in the prepared remarks, with these costs up, if you're shipping anything by rail or by truck your costs are up there as well. So net-net, freight costs and cost of logistics is higher. And we've got to stay on top of being able to pass that through to the market either through direct pricing or through some sort of -- surcharge, that's the word I was looking for. Surcharge or other mechanisms to be able to recover that.

But it is definitely something that is going to continue to be a sort of an inflationary item that we've got to focus on.

The next question will come from Abigail Ebers with Wells Fargo.

Another 1 on caustic soda, just your assumptions underpinning guidance. You're expecting higher caustic soda prices. It looks like VMA said caustic soda at $5 in October, and they're saying it could go up as much as another $10 in November. Is this realistic? Is this like around what you see underpinning guidance? Or would that imply some incremental upside?

We see the same thing. We do see the market firming and we see spot pricing moving up, and you will see some domestic pricing following that. with the lag that you see in the market, we'll start to see more of that benefit in the first quarter that we're going to see here in the fourth quarter, but that's just how it's going to flow through the P&L. So I think what you're reading would support or we would support that in terms of what we've given as our outlook. .

The next question will come from Matthew Deo with Bank of America.

So I want to talk a little bit about cash flow because leverage is obviously ticking up here a bit into the close. And I think there was the prior comments like $150 million to $200 million in cash costs to achieve the synergies. So as you think about like case at which you can do this, and I know, Ken, you kind of made a comment, hopefully you can talk more about this. But would you dip more? And would you dip into the liquidity available to do this and take on a little bit more net debt to get at the synergies? Or is cash flow a governor on pace of synergy capture. And then related, unrelated. I know you made the comment that you paid $100 million to ShinTech this year. Was that in 3Q? Or did that drop in October and would be a 4Q cash flow consideration?

Matt. Listen, we are -- when you think about the synergies and the timing, what we have said when we first announced that the merger is that the spend to get synergies is really going to be more, I shouldn't say back-end loaded, but later in the process of the first 24 to 36 months in terms of the spend for that to get synergies. The synergies that we can get early on are not going to require CapEx or significant amount of spend to be able to achieve that. So I would expect that early on, the spend to achieve synergies is going to be modest, let's say, that way. And then as we get into the process a little bit more as an integrated company, we'll start to see the other opportunities that might require some CapEx or some other expense to be able to realize. And if the business case justifies it and the return is there and the return usually on synergies, the return is usually very fast. It's like months. And if we start to see business cases that have very high returns, then yes, we will go do that.

Regarding your question on cash flow and the legacy litigation payments of $114 million. $114 million was spent through the end of the third quarter. we had spent through the end of the first half, just under $100 million. And we had talked earlier on prior calls that $190 million, $195 million is going to be spent this year. But what we've communicated on this call and to be clear, we would only expect to spend $114 million this year, and that remaining liability, we do not expect to be paid this year.

The next question will come from John Roberts with Mizuho.

How much do you think global caustic soda capacity increased in 2026? And how much do you think it might increase in 2027?

John. Listen, we have talked about this before. If you look at the chlor-alkali markets, they are set up structurally very well for the coming years. There's been a little bit of increase in capacity, but net of closures, it may be a few hundred thousand tons in 2026. That's nothing. I mean it really is a rounding error in my mind, especially when you start factoring in unreliability of assets and that sort of thing. So structurally, I think that from a supply side, we are sitting in a very good place. And that's no different than what we have said, even going back to our Investor Day. We're very optimistic about the outlook for the industry. What we need to see is some demand coming back and -- that will be the biggest driver.

As we start to see the global economy recover in Europe seeing better growth options, China is seeing better domestic growth and consumption. Those things are going to really start to show structurally that the market is in better shape than I think a lot of people believe.

The next question will come from Matthew Blair with TPH.

Congrats on the $1 billion in new MO contracts. Do you have any details on the timing of when those contracts will roll through? And then also, is there any update on the application to take over, I believe it's the Radford anaplant? .

Thanks for joining us. Yes, those contracts -- the second source contract, you'll start to see that rolling through almost immediately. We already had that contract. So this is sort of a continuation of supply as the second source for the U.S. military. We're really happy to have that because don't underestimate, I said this in the prepared remarks, Winchester is the industry leader in being able to develop products for the U.S. military. And the award of that contract just goes to show the confidence that they have in us, and we're really happy about that. In terms of the equipping phase for the 6.8 millimeter facility at Lake City, that's going to start to show up really more next year. We've got to place the orders for the equipment now that we've gotten the funding awarded from the government. And as that spend happens, you'll see that revenue come in, but what you're going to see is there are other projects from this year that will start to come off.

So you're not going to see that incrementally higher, it's probably going to be more stable in terms of project revenue next year. As the project this year that was spending to build the plants to actually build the building, that's completed. Now we're going to be doing the equipping phase and that's going to kick in next year. So hopefully, that helps.

Sorry, let me -- so Chris, let me -- I do want to answer 1 more thing on Radford. Sorry, I forgot that. I forgot Matthew asked about Radford. That process has slowed, and that's been a decision by the government to slow that down. I think I had mentioned previously that just looking at that from from what was bid or put in the RFP by the government, frankly, just did not look compelling for us. And that really is, to me right now is going to be on hold. I don't see anything happening on that in the near term. So I just want to make sure I answer that part as well.

Next question will come from Arun Viswanathan with RBC.

I guess I just wanted to ask about some of your markets? And if you've experienced increased production out of China in the June through September period and -- did it really pick up and say, maybe some of the coal-based chlorine applications? And is that making -- and caustic soda? And is that resulting in extra supply and that's impacting pricing. And do you expect that to continue? Maybe you can just talk about supply demand and chlor-alkali products.

What we saw back when the conflict in the Middle East broke out, and prices for PVC spiked, as you saw everybody that was -- that could make PVC was ramping up, and that included the carbide-based PVC in China. And then what has happened since, when that slug of material was produced, there was a lot of caustic that was produced along with it. That has been working its way through the market. We talked about that on the second quarter earnings call. And as oil prices stay high, the ethylene-based PVC was out of the money.

So you couldn't make money on a cash basis on PVC with oil prices. Brent sitting at $105 to $115 is just not in the cards. Goal-based, you could. What we have seen over the past couple of months, though, is with the higher energy prices now beginning to filter through even in China, even the coal-based carbide based PBC and China operating rates have been declining. So I think that you're starting to see things normalize around the high oil, high energy costs. And that will start to tighten up the caustic market. So that fits with what we've given as our guide already.

We think that things will remain fairly stable from what you see today into the first quarter. I think there's going to continue to be a lot of volatility and elevated prices for oil, and that's going to filter through to the energy base. And I think even this morning, there was an announcement about a European producer closing production of chlor-alkali. So it is starting to trickle through into the market, and that's going to help support what we have put out as our guidance, which is things will get tighter as we go into the new year.

The next question will come from Peter Osterland with Truist.

This is Alex on for Pete. I wanted to ask about sort of what's left as far as cost reductions next year as we get into beyond $250 million and that $60 million to $80 million target. How do you see that as far as being allocated between the segments. .

Alex. So we have done a really good job on Beyond 250. Todd talked about this in his prepared remarks. You can see that coming through in the Epoxy business. Next year, we're going to have another increment, and this is in the appendix slide. $60 million to $80 million is what we would expect for next year. This year, we're going to be $110 million to $120 million. If I look at that year-over-year, even though in the prepared remarks, we had said, you really can't see that yet in the bottom line in CAPV. If you look at our manufacturing costs in CAPV, they are down year-over-year mid-single digits. But you can't see that because of a lot of the other noise that's coming through. That gives me a whole lot of confidence that structurally, those costs are out. And our teams in manufacturing have done a great job adjusting to new processes, new work processes. We've improved things like our time on tools, and our over time, those things we are tracking very closely and the manufacturing facilities are doing a great job at improving those.

If you think about Beyond 250, and Ken mentioned and I mentioned earlier about Epoxy, that structural cost reduction really underpins 1 of the key pillars of the epoxy change year-over-year, and that structural cost and we had talked about this early on, $40 million to $50 million improvement in that year-over-year in Beyond 250 in Epoxy. [indiscernible] clearly is the remaining big piece for this year in that structural cost improvement. And you heard Ken's comments about our underlying manufacturing costs really being lower. Again, we talked about the VCM issue this year. Between the second and third quarter of operating at lower rates for that time period that's a little over $70 million of headwind that we've incurred this year, but those structural costs are out.

And so that's a temporary headwind that occurred in 2026. But those structural costs are permanently gone.

The next question will come from David Begleiter with Deutsche Bank.

Ken, looking at some consultant China caustic export data, is showing a modest increase in exports only last 1 this year from about 4.1 million to 4.2 million tonnes, then a sharp decline next year by about 25%. So -- is that data just either lagging or missing some ingredients? And would you concur that we should see a sharp reduction in China caustic exports next year?

So listen, we -- I think you've got to go back a couple of years, too, to look at that caustic export because if you go back to 2024, it stepped up a lot. And so it has stayed elevated and then we saw another increment in 2026. And that has been disruptive in the market. And I will just say, call it Spade a Spade, they're paying people to take -- they're selling chlorineat negative values to subsidize that. That's what's going on here. And I hope that we see a 25% reduction in caustic exports next year. So I hope that, that report is right, but I will be a skeptic because I think that, that has not been the typical behavior that we have seen.

So what we are focused on right now is what we can control, and that is operating our assets reliably and being able to participate in the markets in the most valuable way that we can. We are doing a great job with that. We've had stable ECU values domestically. We are strengthening our positions in the export markets where we're choosing to play and that will continue into 2027. So I hope that, that report that you're reading is correct because that would be very good for us.

As there are no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Ken Lane for closing comments.

Thank you, Nick, and thank you, everyone, for joining us. We do look forward to sharing more with you about Olin Huntsman in the coming weeks and months. It's an exciting time for Olin, and we very much appreciate your interest in our company. Thank you, and have a great weekend.

Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to Olin Corporation's Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Following today's brief opening comments there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve.

Thank you, operator. Good morning, everyone. We appreciate you joining us today to review Olin's second quarter 2026 results. Please keep in mind that today's discussion, together with the associated slides as well as the question-and-answer session that follows, will include statements regarding estimates or expectations of future performance.

Please note these are forward-looking statements and that Olin's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described without limitations in the Risk Factors section of our most recent Form 10-K and in yesterday's second quarter earnings press release.

A copy of today's transcript and slides will be available on our website in the Investors section under Past Events. Our earnings press release and related financial data and information are available under press releases. With me this morning are Ken Lane, Olin's President and CEO; and Todd Slater, Olin's CFO. We'll start with some prepared remarks, then we'll look forward to taking your questions.

Let me now turn the call over to Olin's President and CEO, Ken Lane.

Thank you, Steve, and thanks to everyone for joining us today. We appreciate your interest in Olin and taking the time to join us on such a busy morning. Let's begin with some highlights from the second quarter on Slide 3. On June 16, we were very pleased to announce our planned merger with Huntsman, bringing together 2 highly complementary businesses to create a world-scale vertically integrated North American-focused chemical leader with more than $12 billion in sales.

Second quarter also saw the conflict involving Iran disrupt chemical supply chains and increased prices. Markets rebalanced as the quarter progressed, although significant uncertainty remains. Caustic soda and EDC export pricing was a second quarter bright spot, reflecting the supply chain disruptions at the beginning of the quarter. This was partially offset by an unplanned VCM shutdown at our Freeport, Texas facility.

Epoxy also achieved higher pricing across all products during the second quarter as hydrocarbon feedstock costs rose and availability tightened. Epoxy demand remained weak in Europe, but the U.S. saw moderate seasonal demand improvement in the quarter. Winchester's commercial ammunition recovery continues as year-over-year demand improves and our pricing initiatives to offset rising metals costs start to gain traction.

Domestic and international military sales continue to show strength. Against the backdrop of weak demand and volatile global events, Olin's self-help efforts remain top of mind. Our value-first commercial approach continues to preserve ECU values, while our Beyond250 initiative is delivering structural cost reductions.

Now let's turn to Slide 4 for an update on our recently announced merger with Huntsman, which creates a $12 billion vertically integrated cost-advantaged North American chemicals leader. Since announcing the transaction, we made significant progress in a short period of time. We filed our definitive proxy on July 13, and Olin shareholders have already begun casting their votes as we approach the August 25th Special Shareholder Meeting.

Todd and I have spent recent weeks on the road with the Huntsman management team, meeting with both Olin and Huntsman shareholders, listening to feedback and discussing our value creation thesis. The response has been very supportive and reinforces our excitement about the deal. In the third quarter, we'll begin pre-closing integration planning led by Todd. This is a very important first step toward realizing the $400 million of synergies quickly following the close, which we continue to expect in the first half of 2027.

Now let's turn to Slide 5 for a closer look at our Chlor Alkali Products and Vinyls second quarter performance. Early in the quarter, the Iran conflict drove supply chain interruptions and dramatically higher feedstock and energy costs, resulting in higher prices for many products. As supply chains rebalanced during the quarter, export pricing for both EDC and caustic soda trended lower, but remained above pre-conflict levels.

These export price trends will offset stronger domestic caustic pricing in the third quarter. We expect product availability to tighten in the fourth quarter, driven by persistently higher feedstock and energy costs as well as several planned industry shutdowns. As discussed on our Q1 earnings call, we had an unplanned outage in early May at our Freeport, Texas VCM plant. While the outage was disappointing, it was an isolated equipment issue that we've addressed.

We were able to restart the plant by mid-May, but VCM will be running at reduced operating rates through the third quarter while we complete final repairs. This outage resulted in a $40 million penalty to second quarter adjusted EBITDA and will have an estimated $20 million impact on the third quarter. Second quarter merchant chlorine sales improved seasonally, supported by stronger water treatment, refrigerants and other derivative demand.

During the third quarter, several planned chlorine customer shutdowns will reduce volumes, but the chlorine pricing remained stable. Finally, we continue to make very good progress on our Beyond250 structural cost savings initiatives, and we're on track to deliver on our commitments.

Turning to Slide 6. Let's review our Epoxy results. During the second quarter, our Epoxy business posted its best results in more than 3 years. As the Iran conflict unfolded, our Epoxy team implemented price increases to offset rising raw material and transportation costs. Security of supply became paramount to customers, supporting Olin's strategy to grow our epoxy participation in both the U.S. and Europe.

During the second quarter, U.S. epoxy resin demand experienced moderate seasonal improvement, while European demand remained flat. Our epoxy cost initiatives continue to pay off between our new Stade, Germany supply agreement and our Guarujá, Brazil plant closure, we've reduced epoxy structural costs by more than $50 million per year. These actions, in combination with our commercial strategy for increased participation have returned this business to positive earnings.

Now let's take a look at Winchester on Slide #7. Monthly out-the-door commercial ammunition sales have improved year-over-year as consumer demand strengthens. Winchester continues to increase prices to offset rising raw material costs, particularly copper and brass. Both of these have resulted in year-over-year improvement to adjusted EBITDA.

Winchester is continuing its disciplined approach to working capital and inventory management as we see our commercial backlog grow. The third quarter is typically our strongest for commercial ammunition demand due to the fall hunting season, and we expect that to drive sequential earnings improvement. Domestic and international military ammunition and project sales continue to be strong.

I'll now turn the call over to Todd for a look at our financial highlights.

Thanks, Ken. I'll now walk through our cash flow, liquidity position and overall financial foundation. Our top priority remains generating strong cash flow, preserving liquidity and maintaining flexibility through the cycle. We ended the quarter with $1.2 billion of available liquidity, including the undrawn capacity under our revolving credit facility.

Our debt profile remains well structured with no bond maturities before 2029. During the first half of 2026, working capital increased by $183 million, reflecting our normal seasonal build, which we expect to liquidate in the second half of the year. The increase also included $93 million of payments against previously accrued reserves related to the resolution of the legacy Shintech litigation matters. We expect to pay the remaining $100 million during the second half of 2026.

As a result of these litigation-related cash payments, we expect to end the year with year-over-year increase in outstanding debt and a leverage ratio of approximately 4.5x. As we further strengthen our financial resilience, any excess cash flow will be used to reduce our outstanding debt.

Our capital allocation priorities also remain consistent and disciplined. First, we continue to target 2026 capital spending of approximately $200 million with investments focused on the safe, reliable and efficient operation of our assets. Second, we expect to continue our long history of uninterrupted quarterly dividend payments. Third, excluding approximately $195 million of cash payments to resolve legacy litigation matters I just discussed, we expect working capital to be essentially flat for the full year 2026.

And finally, we continue to expect 2026 to be a cash-free tax year, plus or minus approximately $20 million. Within Beyond250, we are expanding our focus on people and process improvements and remain on track to deliver more than $100 million of incremental structural cost savings in 2026. In addition, based on the progress we're seeing across the organization, we are increasingly confident we will exceed our $250 million target by 2028.

In summary, our teams remain focused on cash generation, cost discipline and execution of Beyond250. Our strong financial foundation enables Olin to continue executing our value-first commercial approach, while maintaining disciplined capital allocation, a prudent capital structure and resilient cash flows.

With that, Ken, I'll turn the call back to you.

Thank you, Todd. I'll finish up with Slide 9 and our outlook for the third quarter. We expect stronger domestic caustic soda pricing. Export volumes for both caustic soda and EDC should improve, but will largely be offset by lower export pricing.

In Epoxy, stable volumes and an improved mix are expected to benefit third quarter results. However, this will be more than offset by higher European FIFO costs. Winchester third quarter results are expected to improve, driven by higher commercial volumes and pricing, partially offset by higher metals costs. We'll continue to remain focused on working capital discipline.

Against the backdrop of continued global uncertainty, we expect Chemicals adjusted EBITDA to be relatively flat in the third quarter. We do expect a modest earnings improvement at Winchester, although corporate costs are expected to be a sequential headwind. Overall, adjusted EBITDA should again be in the range of $160 million to $200 million.

Stepping back, we remain confident in the long-term outlook for our business. Chlor alkali continues to benefit from an attractive supply/demand outlook relative to other commodity chemical value chains, supported by recent industry capacity closures and limited new capacity additions globally. As the industry leader in chlor alkali, we are very well positioned to benefit from these favorable dynamics.

Our Epoxy business has returned to profitability and continues to improve. At Winchester, self-help actions taken in late-2025 disciplined cost and working capital management and a recovering commercial ammunition market continue to support improved performance. Across Olin, we're making good progress on our priorities, delivering record safety performance in 2026, streamlining work processes, creating new reliability road maps and adding resources to support execution, leveraging digital tools and AI across our plants to quickly identify inefficiencies, reduce costs and improve asset reliability.

Finally, we're reinforcing accountability by aligning our short-term incentive program with site level safety, reliability and cost performance targets, further strengthening our performance-driven culture. Operator, we're now ready to begin Q&A.

[Operator Instructions] The first question will come from Frank Mitsch with Fermium Research.

Aziza Gazieva on for Frank. My first question was around the Iran war. And where would you say this has been the biggest impact within Olin? And if the war were to drag on for a few more months, what are the implications for the company?

Gazieva. Good to hear your voice. Well, listen, the biggest impact really we felt in the second quarter. That's when we saw prices and concern around supply disruptions really ramp up early in the quarter. But as we said in the prepared comments, we saw that abate as we went through the quarter.

Going forward, as markets have rebalanced, what we do expect is just globally costs have risen for folks, especially producing outside of the U.S. That is going to put maybe a higher floor under prices as we go forward. We recognize that there is some softness in some of the export pricing for EDC and caustic today. A lot of that is just digesting the volume that was produced when everybody saw that peak in pricing, all of a sudden, even the producers that were not making any money, some that were even cash negative before prices ran up, saw an opportunity to be able to produce and move some product. That's going to be digested here in the third quarter.

And then as I said, I think things will start to tighten up more in the fourth quarter. There's a lot of capacity that's going to be down. Demand continues to be stable. We're not seeing any erosion in demand. So I think -- we saw the run-up in Q2. We're going to see things kind of normalize in Q3 at a higher cost level, and that should benefit us in the fourth quarter.

The next question will come from Hassan Ahmed with Alembic Global.

Ken, Todd. I wanted to sort of revisit the same question a little differently, trying to get a clearer view on near-term supply-demand dynamics for chlorovinyls. First of all, I would love to hear your views about the return of capacity across the Middle East as and when the conflict does end. And then above and beyond that, obviously, we've seen a reescalation in the price of natural gas in Europe. So would love to hear your views around rationalization out there.

And then on the demand side of it across a variety of chemical chains, it seems that, particularly in Asia, we saw a fair amount of inventory destocking. So could we potentially over the next couple of quarters, expect on the demand side of things, a restocking cycle as well?

Hassan. Well, that's a lot of questions you put in there. I tried to take some notes, and I will try to get to all of them. So listen, again, in terms of short-term supply-demand implications, we saw a run-up in Q2. So looking backwards, we did see a run-up in chlor alkali and PVC operating rates in Q2.

Yes, you did see a lot of the Asian ethylene-based producers cut back. Carbide ramped up, even Europe ramped up and had a spike in operating rates in Q2. But we have seen those reverse. So like I said, there's a bit of a -- we had this lump in Q2 of production. Now people have cut back on operating rates, and that's going to start to filter through into the market as we go through the third and the fourth quarter.

I'm not as much worried about what's happening in terms of the return of capacity in the Middle East. That is much less of a concern for me. I think -- the reality of it is, it is hard to put this genie back in the bottle, and I'm not sure exactly when things are going to settle down there. So that's less of a concern.

I think the thing that we're going to watch is going to continue to be around what's happening in -- primarily in China and what are they doing with their assets. We have seen operating rates in China already reduced in the third quarter. And again, it takes a little bit of time for that to filter through into the supply-demand balances, but it will.

And that, combined with some outages that we see, particularly coming up here in North America should be constructive for supply/demand as we finish out the year. Going back to Europe. Europe, again, we did see a run-up in operating rates there, but you saw that come back as prices began to normalize and the fear of not being able to get product sort of wane, I would say.

And your final point there around destocking is one that's going to be really important to watch because I do think that the buying pattern that we have seen from customers is initially, yes, they were trying to buy to be ahead of any disruptions. But now I think what you see is the behavior is they're going to consume their inventory because they're hoping that prices or costs will come down in the future.

So yes, that is certainly a situation that could change here that all of a sudden people do need to restock and demand -- the apparent demand may improve. But I just want to reiterate, underlying housing, underlying automotive demand is still -- it's stable, but it is not recovering yet. So all of these dynamics are very volatile. They're hard to predict.

And frankly, that's why we gave a pretty wide range for the third quarter outlook that we did.

The next question will come from Gabe Hajde with Wells Fargo.

Ken, Todd. I wanted to ask about kind of the 4.5x leverage target at the end of the year. And you've kind of given us some building blocks, Todd, I think about the normal -- when I look at the model, $200 million, give or take, on working capital release and $100 million payment, so I'm kind of getting net debt maybe at $2,750 million by the end of the year, which would kind of imply a full year EBITDA of $610 million.

And then I'm trying to kind of juxtapose that, I guess, with some comments that you're making, Ken, about improved dynamics in the fourth quarter for the chlor alkali business.

Gabe, thanks for joining. I'll start, and then I'll let Todd add to it. First, I just want to emphasize that as we have been saying over the course of the second quarter and as we talked about our merger with Huntsman, even for Olin, deleveraging is going to be a priority. And that is something that we'll be very focused on.

The teams here are extremely focused on cash generation and reducing working capital and managing that very carefully. I think you've got to realize that there is a lot of volatility in the world around things that are going on with the geopolitical environment that we're in. And that is not going to change anytime soon, as I just mentioned. So we saw the run-up in Q2, which was very beneficial for us. You saw that in our results.

We're going to see a little bit of giveback here in the third quarter as prices, especially in the export markets reflect some of the pullback in terms of the cost and the results of customers, again, maybe trying to buy ahead a little bit of a lot of uncertainty. I think people are getting more comfortable living in an uncertain world for what that's worth. But what won't change is that there is going to be outages that are occurring. And if you think back to the end of last year, we were already in an environment where industry rationalization of capacity, relatively good demand.

Yes, it's not growing right now, but it is stable. So in the face of all of that, we were seeing things begin to improve already. And I think that's what I'm saying is you're going to get back to a more stable environment that reflects what we saw kind of late Q1 and even in the latter part of Q2. But that spike that we saw in Q2 is going to be an anomaly here as things try to find a more balanced way forward in a very uncertain world.

But Todd, I'll let you talk to the...

Gabe, thanks for the question. As we obviously do not provide annual EBITDA outlook, but we do expect net debt to increase year-over-year from year-end '25 to year-end '26, as I said, driven by the roughly $195 million of legacy litigation payments that we're going to be obligated to make during 2026.

And so we would expect to end the year in that 4.5x range on leverage. I just want to remind everyone on the call about cash flow. When you think about our trailing 12-month adjusted EBITDA here at the end of June is roughly $570 million. And when you look at that number, Olin generated roughly $100 million of levered free cash flow in the last trailing 4 quarters even at those levels of adjusted EBITDA.

That cash flow has really been utilized to repay legacy litigation matters. But -- and that -- when I talk about levered free cash flow, that's after paying the dividend, that's funding all of our capital spending, paying all our interest, all our capital allocation priorities. So Olin does generate cash flow at very low levels of earnings, which is, I think, a distinction among many of our commodity chemical peers.

The next question will come from Josh Spector with UBS.

It's Chris Perrella on for Josh. Ken, for the CAV business, with the VCM fixed in place, do you expect to get that $20 million back in the fourth quarter?

And then for Epoxy, do you -- how large is that FIFO headwind in the third quarter? And is pricing elevated enough to offset increasing raw materials? Or do you need another round to kind of keep things where they are?

Chris. Yes. So listen, as we get the VCM asset back to full capacity at the end of the quarter here, we do expect to see recovery of that in the fourth quarter. All that is going well at this point. So Todd, do you want to take the second part of that question?

Yes. Sure. No problem. Epoxy has announced price increases here in the third quarter commensurate with increased hydrocarbon and raw material costs that they've seen most recently by the most recent escalation of the conflict in the Middle East. And we would expect it net to be a headwind on FIFO between Q2 and Q3. But we clearly expect Epoxy to continue to generate positive EBITDA for the third quarter.

The next question will come from Matthew DeYoe with Bank of America.

This is Hakim Sanfo on for Matthew DeYoe. You guys mentioned that U.S. epoxy resin demand experienced seasonal improvement. What was the main driver? And do you expect it to continue into Q3? And then in Europe, what needs to happen for demand to improve? Is it more construction and industrial demand?

Yes, listen, we did see some -- and I would say moderate was purposeful because we didn't see the normal level of seasonal improvement even in the U.S. But you still do have a construction season in the U.S. that drives things like coatings and that sort of thing.

In Europe, we have not seen that improvement. We've seen really a flattish market in Q2. And normally, you would see some seasonal improvement. Yes, you're going to need to see some improvement in housing and industrial demand in Europe before you see that. But I think you're going to continue to see headwinds there because you've got higher energy costs that are now starting to impact not just the cost of our production, but the cost of everyone else that are producing things in Europe.

And I don't see anything in the short term that is going to sort that out. Their policies in Europe continue to be ones that are going to constrain economic growth and expansion. And so the things that we are doing like reducing our cost structure is going to continue to be extremely important. We're not counting on the market to help us in Europe anytime soon.

The next question will come from Arun Viswanathan with RBC Capital Markets.

This is Arun on for [indiscernible]. Have you guys broken out how much the FIFO benefit was that you called out for Epoxy? I know it's improving, but given that kind of reversal of that benefit next quarter, do you expect overall segment earnings to improve? Or should they kind of be more in line with where they were this quarter?

Yes. Great. Thanks. I appreciate the question. We -- maybe I'll start with the second part. As we think about chemicals earnings, we would expect chemicals earnings to be sequentially similar between Q3 and Q2.

We would expect Epoxy to be slightly lower in the third quarter compared to Q2 with chlor-alkali better because obviously, the -- so as we think about that, Epoxy being slightly lower will be driven by the lower benefit from FIFO and in effect, the higher raw material costs running through the Epoxy P&L. We have not quantified a specific number associated with that. But that's how you should think about sequentially Q3 versus Q2.

The next question will come from Matthew Blair with TPH.

Slide 15 shows that chlorine prices fell in Q2, even though most of the chlorine derivatives moved up in price, things like PVC and EDC. I think you also mentioned that your merchant chlorine sales were pretty strong in Q2. So could you just help us understand this dynamic and what caused chlorine to come down? Was it, I guess, mostly a supply-driven response?

And then finally, I just wanted to confirm, I think you said you expect chlorine prices to be relatively stable, relatively flat in the third quarter.

Yes, you're correct. We do expect that to be the case. And you realize that for the chlorine pricing, you're talking about very small movements on an illiquid market. So it is frankly not very material to look just at the chlorine price by itself. That's why we published that PCI. It's more important to look at what the ECU with the derivatives is doing across the portfolio.

I'll just be honest with you, the chlorine price by itself is not something to look at and pay a whole lot of attention to. It is just a reflection of what you see printed in the publications, which have got a lot of, I would say, don't have a lot of transparency with them. So -- but going forward, we expect to see that stable.

The next question will come from John Roberts with Mizuho.

This is Saurabh Dhir for John Roberts. I think just want to start with the Winchester. You said there's less import competition on the commercial side. Is that related to the wars outside the U.S. or metal costs or something else that is reducing the competition?

Thanks for your question. Yes. So the lower imports are related to tariffs. So if you look at the tariffs that have been placed on imported ammunition, it has fluctuated a little bit, but it's now 20% in some cases, a little bit higher than that.

So we continue to see that being a tailwind for the commercial business for Winchester. We have faced a lot of headwinds related to the tariffs around copper and brass. And so we've been having to fight that with our price increases. But it's now good to see that the imports are getting tariffs that are going to help give us a little bit of support here.

The next question will come from Pete Osterland with Truist Securities.

This is Alec on for Pete. Going forward, what have you guys achieved so far regarding the $30 million of cost outs in Winchester? And what remaining buckets are you targeting? If military and commercial are improving, does the cost outlook change?

So we are doing very well in Winchester with our cost outs. We've already recognized a pretty significant part of that $30 million that we've committed to through efficiency improvements. You heard us talk about in the fourth quarter of last year, we were doing things to rightsize our shifts and make sure that we make sure that we were operating as efficiently as we could at all of our sites, and we've made a lot of very good progress there.

We've also just kicked off here in the third quarter, our Beyond250 efforts, where we're bringing in some outside expertise to help us further improve the efficiencies, particularly at the Lake City facility in Missouri. And we're confident in the $30 million that we have out there. In fact, I would even say that for Winchester, we're likely to exceed that number once we get a little bit further down the road with assessing where we're at in Lake City.

The next question will come from Roger Spitz with Bank of America.

The Shintech's $100 million payment, is that on that Slide 14? Or is that addition? I just wasn't clear on that.

Roger. Todd, do you want to take that?

Roger, the $100 million payment on Slide 14, we have the $100 million isn't on Slide 14. Slide 14 is your full year modeling assumptions. However, in our outlook expectations for net debt to increase for the full year -- year-over-year, that does include $100 million payment in the back half of 2026.

As there are no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Ken Lane for closing comments.

Thank you, Nick. I just want to thank everyone for joining us today, and thank you for your interest in Olin. I wish you all a very safe and relaxing weekend.

Thank you for attending today's presentation. You may now disconnect.

Welcome to the conference call and webcast to discuss the combination of Olin Corporation and Huntsman Corporation. [Operator Instructions]. I would now like to turn the call over to Steve Keenan, Director of Investor Relations at Olin. Sir, please begin.

Thanks, Chelsea, and welcome, everyone. I'm joined on the call today by Ken Lane, President and Chief Executive Officer of Olin; and Peter Huntsman, Chairman, President and Chief Executive Officer of Huntsman. Todd Slater, Olin's Senior Vice President and Chief Financial Officer; and Phil Lister, Huntsman's Executive Vice President and Chief Financial Officer, will participate in the Q&A portion of today's call. Before we begin, I'd like to remind everyone that today's discussion regarding Olin and Huntsman includes forward-looking statements, including expectations regarding the proposed transaction. These statements are subject to risks and uncertainties, and we encourage you to review our related SEC filings for more detail. I would now like to turn the call over to Ken.

Thank you, Steve, and good morning, everyone. I appreciate you joining us. Today is a momentous one for Olin and Huntsman, two storied American companies with a shared commitment to safety, integrity, operational excellence and serving customers around the world, all while creating value for our shareholders. .

The all-stock merger of equals we announced this morning will create a greater than $12 billion chemicals leader with a strong North American anchor and complementary European and Asian portfolios. By integrating Olin's strong upstream manufacturing and feedstock position with Huntsman's differentiated downstream capabilities, we will have a world-scale, vertically integrated platform that is better positioned to serve customers and deliver resilient financial performance.

The combined portfolio also creates tangible integration opportunities across key value chains, supporting a lower cost position through the cycle. These strategic tailwinds are paired with more than $400 million of cost synergies and integration benefits. The combined business will have strong cash flow to support disciplined capital allocation including near-term deleveraging, returning capital to shareholders and investing in high-return growth projects.

I've spent my career in chemicals across both commodity and downstream businesses, including running a global polyurethanes business. I understand how to get the best out of these businesses in many respects, that means running them as complementary, but separate, and I'm confident we can do that while also delivering on the benefits of this transaction.

Olin's stated strategy is to focus on strengthening our core businesses, maximizing valuations where we can achieve attractive returns through innovation and operational improvements. This transaction hits those marks. Further, as Olin Huntsman will be led by a team with the right experience and shared foundational values to ensure we are capturing all the opportunities available to us.

I'd now like to turn it over to Peter Huntsman to walk through the transaction structure and combined platform in greater detail. But before I do, I'll take a moment to recognize Olin's dedicated employees whose commitment and focus has made today's milestone possible. I'm very proud to be part of the Olin team. I'd also like to acknowledge Peter and his team. As you might expect, over the course of reaching this agreement, Peter and I have spent a good deal of time together. It's been clear what a world-class team Huntsman also has with great expertise, and most importantly, truly held values that we at Olin share.

Peter, I'm looking forward to working with you and the other directors of the Board. I know OlinHuntsman is going to do great things.

Ken, thank you very much. Good morning, everyone, and thank you for taking the time to join us. It is an honor to be here today, and I echo Ken's enthusiasm for the opportunities ahead. As our industry continues to globalize, we compete more today against countries than companies, trade policies and global supply chains more than ever before. The opportunities this merger creates enables us to generate greater value for our shareholders, delivers exceptional services and products for our customers and provide greater opportunities and stabilities for our associates. This merger of equals takes 2 great companies and create a much stronger global leader.

So let me provide some further detail. Let's turn to Slide #5. We have structured this combination as an all-stock merger of equals, which we believe capitalizes on the strength of both companies and present the best value creation opportunities for both sets of shareholders. Under the terms of the agreement, Huntsman shareholders will receive 0.576 shares of Olin for each Huntsman share they own, resulting in Olin shareholders owning approximately 54.5% and Huntsman shareholders owning approximately 45.5% of the combined company. The combined company will be named OlinHuntsman Corporation and will be headquartered in the Woodlands, Texas.

As Ken mentioned, we have identified more than $400 million of cost synergies and integration benefits. Our respective teams have spent a great deal of time together identifying and validating these synergies, and Ken will provide greater detail on how we will achieve them later in this presentation. The transaction is expected to close in the first half of 2027, subject to receipt of regulatory approvals and satisfaction of other customary closing conditions, including approval from both Olin and Huntsman shareholders. Following the close, I will serve as Non-Exec Chairman of the Board of Directors, and Ken will assume the role of Chief Executive Officer. Phil Lister, will serve as Chief Financial Officer; and Todd Slater, will serve as the Chief Integration Officer.

Let's turn to Slide #6. Let me spend a moment on the scale and benefits of the combined company. Using 2025 reported financials on a pro forma basis, the combined company would have generated approximately $12.5 billion in revenue and approximately $1.3 billion of adjusted EBITDA, including expected cost synergies. We will be anchored in cost advantage in North American assets and feedstocks with integrated portfolios that create multiple channels for improved economics and value creation across a broad range of attractive end markets. We also have identified opportunities in Europe that capitalize on our integration and downstream capabilities. With Huntsman's relationships in these global end markets, we have a unique opportunity to deliver for our customers more profitably by leveraging Olin assets to improve efficiency across the value chain.

We can turn to Slide #7. Our industry has changed a lot over the last 5 years. Cost position, reliability and integration matters more than ever. That is why I believe this type of integration is essential to driving optionality and higher profitability now and into the future. You see on Slide 7, Olin brings advantaged upstream leadership, including an efficient cost position from U.S. Gulf Coast economics and world-scale chemical assets. Huntsman brings downstream application expertise, including leading positions in MDI and polyurethane systems ride and advanced materials, supported by deep end-market customer relationships. Put simply, we believe this combination will drive value creation for our shareholders and unlock greater profitability.

So looking at Slide 8, there is a clear indication of how integration creates value for both companies across several key value chains. The combination brings together selected Olin and Huntsman capabilities across electrochemical units to polyurethanes, electrochemical units to amines and to epoxies. Olin is strong at the front end of the value chain with the ability to make chlorine and caustic soda safely, reliably and at world scale. Huntsman is strong downstream, particularly in polyurethanes, amines, advanced materials and formulation-driven applications. By combining these capabilities, we create more reliability and better integrated supply chains capable of generating greater value to shareholders and customers.

For example, today, Olin has several existing outlets for chlorine, including vinyls, epoxy, water treatment, chlorinated organics, merchant chlorine and hydrochloric acid. Through the combination, OlinHuntsman will have additional outlets across polyurethanes, amines and advanced materials broadening participation across the value chain. It also creates a vertically integrated U.S. MDI producer. Starting in 2031 as current supply contracts expire, we expect to add an additional $100 million or more of incremental synergies. The result is a more closely integrated set of chlorine-linked value chains that benefits both businesses and positions the combined company for future downstream opportunities across high-growth end markets.

Before turning our concluding comments back to Ken, I'd like to comment that from the first meeting nearly 4 months ago, we have both seen this as a merger of opportunities where the sum of the parts create greater benefits than both companies remaining separate. I have found in Ken, a leader that shares a vision and the capability to create greater value and opportunity in this merger. Ken?

Thank you, Peter. The expected cost synergies and integration benefits from this combination are significant and actionable. The companies have identified more than $400 million of value with clear line of sight. Of that, we see $300 million of synergies with much of that achieved in the first 24 months following close. These synergies are expected to come from several areas, including purchasing and raw materials integration, optimization of operations and SG&A savings.

As we've said, we also expect to capture more value internally with more than $100 million of additional raw material integration benefits in 2031 due to expiring contracts and Olin stepping in to fill supply. We expect the cost to achieve these synergies to be approximately $150 million to $200 million.

In addition, OlinHuntsman is expected to benefit from approximately $125 million of cash tax benefits from acceleration of tax NOLs, which is not included in the synergy figure. Both Olin and Huntsman have executed complex integrations before, including the Dow Chlorine Products business, where Olin delivered more synergies than originally announced, and Huntsman's track record of integrating multiple acquisitions of different sizes and complexity over the years. We'll bring that same discipline and accountability to this combination.

OlinHuntsman is expected to have improved profitability and cash flow through the cycle. As we mentioned earlier, despite a challenging market backdrop on a 2025 pro forma basis, OlinHuntsman would have generated over $900 million of adjusted EBITDA. When including the expected synergies of $400 million, the combined company would have generated approximately $1.3 billion of adjusted EBITDA.

Looking across the 2021 to 2025 period on a pro forma basis, OlinHuntsman would have generated approximately $2.7 billion of average adjusted EBITDA, including the $400 million of synergies. We believe this shows the capability of the combined company to deliver compelling profitability, substantial free cash flow and importantly, greater resilience across varying operating environments.

On the following slide, we provide some more detail on the pro forma financial profile of the business. We expect to have a healthy balance sheet with an evenly weighted maturity profile, no bond maturities before 2029, and an attractive blended cost of debt of approximately 5%. Pro forma year-end 2025 net leverage would have been 4.6 times or approximately 3.2 times with full synergy implementation. And as mentioned earlier, one of our initial priorities for our free cash flow will be to deleverage.

Beyond deleveraging, our cash flow will be an engine of shareholder value creation. First, maintenance capital. We expect to invest approximately $400 million per year on a combined basis to ensure safe and reliable operations. Second, the dividend. We expect to continue a stable dividend policy supported by resilient through-cycle cash flows of the combined company. And with excess cash, we'll prioritize returning cash to shareholders and pursuing growth projects that meet a high return threshold.

To summarize, this combination is a compelling opportunity for both sets of shareholders today and into the future. Together, Olin and Huntsman will create a greater than $12 billion North American chemicals leader that will better serve customers across diverse and growing end markets. The combination creates a vertically integrated platform with a structurally lower cost position. We'll approach integration with discipline, including how we segment and manage the combined company so that integrated manufacturing and downstream businesses can each succeed.

OlinHuntsman will benefit from a highly experienced management team with a shared focus on value creation. This strategic combination creates greater resilience, stronger cash generation and a balance sheet that will open multiple avenues for creating value for our shareholders.

With that, Chelsea, we're now ready to take questions.

[Operator Instructions]

Our first question will come from Josh Spector with UBS.

I guess I wanted to ask more on the Huntsman side specifically. I mean it seems like doing this integration here, I mean, a lot of what Huntsman has been doing over the last decade has been shedding more of the commodity operations, kind of trying to focus more downstream. This seems like a step backwards in that regard. Obviously, the cost savings are large and clearly a big driver here. But just curious strategically kind of why go this route now with the business versus what the strategy has been over the last 5, 10 years?

Josh, excellent question. Look, as we look at our advanced materials and our ability to move further downstream, I see nothing in this merger that would in any way prohibit that. As matter of fact, I see it as a great opportunity that this will be an entity that will create even greater cash, create greater opportunity with a very resilient supply chain and a very competitive one at that.

As I look at our competitors and the changing landscape around the world, the value that many of the people that we compete with today are integrated, whether it's in coal in China or in the Middle East with some sort of subsidized or government rationed gas or energy or even in the United States, being able to have a North American gas advantage. I look at all those regions around the world where we presently compete, we'll be in a more competitive position. We'll be in a company that is generating greater cash, has a stronger balance sheet. If anything, we'll have a greater opportunity to focus on those downstream applications. So I see this as really a win-win on that strategy to keep us competitive.

Our next question will come from David Begleiter with Deutsche Bank.

This is Emily Fusco, on for Dave Begleiter. I was just wondering if you could maybe -- for the $75 million purchasing economics, if there's any overlap on savings or just any color there?

Emily, this is Ken. Listen, that $75 million is what we generate when we look at the joint purchases or the purchases that we do as independent companies and you bring us together and you look at the price leverage that we'll have, we'll be reducing supplier bases. Those are pretty standard. So we feel highly confident about achieving that $75 million.

I would just note, Emily, that as we look at that $75 million, we've had our purchasing groups that have been able to interact and be able to pick, I wouldn't say that just the low-hanging fruit. But as you get these teams together, as you get better integrated, as you get operating and looking at the number of warehouses and transportation, logistics, all those areas that fall under purchasing, both Ken and I feel that these synergies are imminently doable. And if anything, once we get digging deeper, we think that there'll be even greater opportunity.

Our next question will come from Frank Mitsch with Fermium Research.

A question for both Ken and Peter. Peter, you mentioned that you started in detail this combination 4 months ago. I'm curious from both of you as to what other options were considered and why was this one the best. And also if you can enlighten us, is there a termination fee involved in this transaction?

Frank, thanks for joining us. So listen, as you can imagine, you know at least for Olin, we had an Investor Day back at the end of 2024. And obviously, when you go through and you do corporate strategy work, you look at other options. This is a clear strategic combination sense. It's extremely compelling when you just look at the value chains where we participate and Huntsman participates, very, very complementary.

So we always view this as one of the top of our priorities, and I still feel that way today. So we just were able to validate that over the last few months when we got our teams together that the amount of value that this creates is very significant. And as I said in the prepared remarks, frankly, I do expect that we're going to be able to do this fairly quickly. So if you look within 2 years, we will have achieved the majority of the $300 million. And then there'll be another $100 million that we get in 2031. That is a lot of shareholder value that we're going to be creating with this combination. And if you just capitalize those synergies, it's equivalent to about $2.5 billion to $3 billion. So it's a big number.

Frank, Peter here. I think that I'm not sure there's another company in our industry that has gone through more large-scale potential transactions, divestitures, possible mergers, even outright sales. As I've said multiple times on earnings calls and in public audiences, I think that it's one of our first obligations as a company is to be able to look at our portfolio and to be able to ask some very serious questions about how that -- how that portfolio is best situated to create shareholder value.

As I look at this merger of equals, I look at the synergies, I look at management, I look at the supply chains, this touches all 3 of our divisions. This isn't just an area that we're going to be bolstering epoxies and polyurethanes. In every one of our divisions, the chlor-alkali chain is absolutely vital to our competitiveness, being able to have a competitive, a resilient and a global leader like Olin, being able to complement those downstream businesses. This is -- I think it's just -- with all the opportunities that have been before us for years, this is really an ideal match for our company.

Our next question will come from Kevin McCarthy with Vertical Research Partners.

Two questions. On the synergy side, you have an additional $100 million of procurement savings in 2031. So I was wondering if you could comment on why those particular savings would take longer to extract or whether or not there are any contractual constraints at work there? And then second, maybe for Ken, does this change strategic options as it relates to Winchester at all, things like scale or tax angles associated with a theoretical separation there? I appreciate any thoughts on that subject.

Absolutely. Thank you, Kevin. So listen, I'll start off with the easy one first. Yes, that $100 million in 2031 is a synergy that is really related to timing of current contracts that will be expiring and then Olin will step in and begin supplying that. So that is a very easy one. That is a benefit that will happen. It's just a matter of time, and it will be a very good fit with our portfolio.

To your second question, Winchester is going to continue to be a very important part of our portfolio. It's going to continue to be run as a key business within OlinHuntsman. The strategy that we rolled out at the Investor Day at the end of 2024, where we said we were going to focus on growing our defense business and continuing to get a lot of value for the leading brand in the industry, that holds true. We see a lot of great things ahead for Winchester and nothing changes with that related to this combination.

Our next question will come from Jeff Zekauskas with JPMorgan.

What are the cash costs of achieving the synergies? And for Peter, Huntsman may have had the possibility of combining with an MDI producer. Why was it better over a longer period of time to not wait and look for an MDI opportunity rather than to merge in more of a diversification transaction?

Jeff, excellent question. I think that as we look at the MDI industry, I think that you're probably limited to some degree with various antitrust issues on a global basis. But more importantly than just MDI, which is certainly an important part of our company, but it is certainly not the entirety of our company. And as we look at a transaction that is going to impact our downstream advanced materials, our amines, our MDI, really across the entire supply chain, this has a much greater impact on that than I think just adding more MDI tonnage, being able to have a very competitive North American cost advantage, being able to have integration opportunity in Europe.

And I think that as we look at the growing markets in Asia for both companies, we see opportunities there to leverage existing contracts, existing customer relationships and so forth. So I think there probably would be a space there for an expansion in MDI. But as I look across the board, again, across what is going to have the greatest impact for creating shareholder value across the board, this would have a much greater impact.

And then Jeff, related to the cash cost of the synergies, that is $150 million to $200 million is what we're estimating. And one thing that I want to point out as well is this is very consistent with the strategy that we've been laying out in terms of optionality for our ECUs. And by doing this as a merger of equals, this doesn't take anything off the table. So the options that we had before still remain. And I think as a combined company, they're going to be even -- as a stronger company when we're combined, those options are going to look even more attractive.

Our next question will come from Hassan Ahmed with Alembic Global Advisors.

I guess you guys mentioned that Winchester will continue to remain a core part of the portfolio. Now as you guys get more diversified in chemicals, I'm just trying to sort of understand if there are other portfolio management opportunities as well. Peter, historically, you talked about growing the Advanced Materials business. But now obviously, having more in the portfolio, I mean, could that be a divestiture candidate amongst others?

No, I personally don't see that as a divestiture candidate. I do see it as a continued platform for growth, both on the short-term and on the longer-term basis. And as you think about supply chain, the resiliency, the uniqueness of this combination, being able to start with sodium chloride with the salt molecule, take that all the way down, really uninterrupted to the wing of a Boeing or Airbus jetliner. I mean, to be able to have that integration and to be able to look at the opportunities that exist within that chemistry along that entire -- not just on the end, but also at the beginning of that chemistry, the efficiencies and so forth, the relationships that can be built, I think, is terrific. So no, I don't see that as a divestiture candidate. If anything, I see it as a core component to future organic growth.

Our next question will come from Laurence Alexander with Jefferies.

It sounds as if you have significant strategic optionality in both the sort of ammunition defense and the epoxies and the MDI potentially. So how are you thinking about your balance sheet for the pro forma entity? Like how much would you be willing to flex the balance sheet for an acquisition? How would you think about an appropriate mid-cycle balance sheet target for the pro forma entity?

Laurence, thank you for joining us. So listen, obviously, we're going to be doing a lot of work between now and closing to get ready for day 1, and there'll be a lot of work and thinking that we've got to do around strategy for OlinHuntsman. We, as I said just a minute ago, by structuring this as a merger of equals, we haven't really taken any options off the table. And now we've got to get together as OlinHuntsman and figure out where we want to go next.

But as we said in the prepared remarks, capital allocation, the priorities will continue to be: first, investing in our assets for safety and reliability, maintaining a stable dividend. And then excess cash is going to go towards deleveraging initially. That's got to be a priority for us in the short term. But beyond that, we're not ready to talk about any other strategic options, but we're extremely excited about what the future holds.

Yes. I would just reemphasize what Ken said about that capital discipline. I think this is something where we are of one mind. As the only thing that I see that is at all problematic with this merger is I wish it would have happened a year ago. Had we been in these challenging times that we're in today as an industry and this merger had already taken place a year or 2 ago, the combined entity from a cash, from a balance sheet, from a resiliency point of view would be that much greater value.

And we -- I think I can speak for both of us saying that we're in these sort of market conditions, balance sheet strength and deleveraging is going to be a very key and fundamental. I hope that the time comes and we can -- we're generating the cash and so forth, and we have some great discussions internally as to where that cash should be deployed in other areas. But right now, particularly during these times, our focus is clear.

Our next question will come from Mike Harrison with Seaport Research Partners.

Can you hear me okay?

We can.

Perfect. I'm just curious from a revenue growth perspective, are there any end markets or geographic positions or maybe specific customers where Olin might be able to realize some cross-selling or other revenue synergies by leveraging Huntsman? And to the extent that you see some revenue synergy opportunities out there, how should we think about the timing of realizing some of those synergies?

Mike, listen, one thing I want to be really clear about is we have not included any revenue synergies in these numbers. That doesn't mean that we don't see opportunities. We see a lot of opportunity, especially in the epoxy space for us to be able to leverage the downstream business that Huntsman has with their channels, but also with the current Olin know-how and backward integration.

So bringing those 2 together is going to create a more competitive business that will allow us to be able to compete in some industries that maybe one of us weren't able to previously, and now we're going to be able to do that. So there's a lot of opportunities that are still to come. I'm extremely optimistic that we will be able to grow not only current market positions, but enter new markets that maybe we haven't been able to position that we're going to have. So stay tuned. Again, there's a lot more to come, but we have not included any of those revenue synergies so far in the valuation.

Our next question comes from Matthew Blair with Tudor, Pickering.

You highlighted the opportunities for cost cuts and integration benefits from the deal. I wanted to ask about valuation. So these 2 companies tend to trade at pretty different multiples. I'm showing over the past 3 years that Huntsman has traded at an average forward consensus EBITDA multiple of nearly 10 times, Olin is around 6.6 times. So my question is, as you're doing this analysis, where did you assume that NewCo would trade? And is it a blended multiple? Or is there a risk here that NewCo would trade at lower than the blended multiple that might be closer to the Olin multiple?

I think -- Matthew, I think the market is going to have to determine that. When I look at the overall size, resiliency, again, I don't want to get too much in the weeds there on the multiple. Multiples have a lot to do with where you are in the cycle at any given point. And if you're at the bottom of the cycle, you typically have a higher multiple. And this is -- as you're at the top of the cycle, you're probably going to have a lower multiple.

So I think that as we look at this rather than trying to get a multiple that's exactly right between the 2, the market will determine. If you have a more resilient company, if you have opportunities for growth, further synergies, further organic growth efficiencies through your supply chain, as these things all come together, and you see a stronger balance sheet is emerging, all of these things, I think, will have a factor into what your multiple is. And that probably will be different than what Olin is today or what Huntsman is today. It will be what OlinHuntsman is going to be.

Absolutely. And Matthew, just to reinforce, $2.5 billion to $3 billion of capitalized synergies is what our focus has been on and will continue to be on.

Our next question comes from Duffy Fischer with Goldman Sachs.

Two questions. First one is just on a notional basis, how much does this integrate your ECU? So if you basically sold everything from Olin to Huntsman, how many ECUs would you consume in doing that? Again, the exact number, but just roughly what is the integration? And then second, on the shares outstanding, if we just use your ratio in the 173 million from the last quarter, that would be about 97 -- I'm sorry, 94.7 million shares. Is that the right number? Or would there be some change of control stuff that there will actually be more shares involved with the conversion?

Duffy, I'll take the first question, and then I'll ask Phil to comment on your second one. I mean, listen, as you know, Olin is the largest chlor-alkali producer. So this is a meaningful amount of integration for our ECUs. But as you know, we don't operate our assets fully loaded today in the trough that we're in. So yes, this is a great synergy, a great benefit for us as a combined company. But the optionality for our ECUs that we talked about at the end of 2024 are still intact. And so we're really excited about what we see here probably as much from a downstream perspective as we do from an upstream. So it's meaningful for us, but we still have got the largest footprint in chlor-alkali.

Duffy, on the share count, the way the merger of equals will work is that you use a fully diluted share count. And for Huntsman today, that's approximately 178 million shares. If you do the math on that with the exchange ratio that you quoted, you'll end up with 97 million shares ultimately at conversion.

Our next question will come from John Roberts with Mizuho.

Is the acceleration just the expectation of higher earnings post merger? Or is there something beyond that, that you're expecting?

Yes, John. So if you look at the merger and bringing both Huntsman and Olin together and you look at the NOLs that Huntsman has, there's a clear opportunity to utilize those, particularly given the strength of Olin and particularly given the strength of Olin in the United States, we would see a clear acceleration from bringing those 2 operations together.

Our last question will come from Bhavesh Lodaya with BMO Capital Markets.

Maybe a follow-up question on the balance sheet leverage. Do you see synergies as the primary way to delever the combined entity here? And then presumably with some initial thoughts around the merger synergies generation, how should we think about the free cash flow profile in the initial years?

So let me start, and then I'll let Phil comment as well. I mean, listen, both the synergies and excess cash are going to be used to initially delever. I wouldn't say that one is primary over the other. We're going to work as hard as we can to realize the synergies as fast as we can. Todd Slater, I can promise you, is absolutely committed to doing that as quickly as possible. And as we realize that and our earnings expand and our cash flow expands, we'll be allocating some of that cash to delever. But Phil, what would you add to that?

Yes. If you look at the free cash flow delivery and just look back to 2025, a large focus from both teams on cash management. And you look at the metrics around operating cash flow conversion, look at free cash flow conversion, those have been pretty high for the company. That will remain as we go forward. It will be a stronger financial profile as a result of the delivery of those synergies, and that will fall through to the free cash flow line. So we see a stronger free cash flow conversion as we move forward.

There are no further questions in the queue at this time. So I'd like to turn the floor back over to Ken Lane, CEO of Olin, for any closing remarks.

Thank you, Chelsea. We're very excited about our future as OlinHuntsman and the value we'll create. We look forward to continuing to engage with all of you as we progress toward closing the transaction. In the meantime, both Olin and Huntsman will continue to operate as 2 separate and independent companies. Our highly experienced management teams and thousands of associates and teammates around the world will continue to focus on safely and reliably serving our customers. We're grateful for all that they do each day to make Olin and Huntsman the incredible companies they are. Thank you all for joining us this morning.

This concludes today's conference call. Please disconnect your line at this time, and have a wonderful day.

Good morning, and welcome to the Olin Corporation's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve.

Thank you, Nick. Good morning, everyone. We appreciate you joining us today to review Olin's first quarter 2026 results. Please keep in mind that today's discussion, together with the associated slides as well as the question-and-answer session that follows, will include statements regarding estimates or expectations of future performance.

Please note, these are forward-looking statements and that Olin's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described without limitation in the Risk Factors section of our most recent Form 10-K and in yesterday's first quarter earnings press release. A copy of today's transcript and slides will be available on our website in the Investors section under Past Events. Our earnings press release and related financial data and information are available under press releases. With me this morning are Ken Lane, Olin's President and CEO; and Todd Slater, Olin's CFO. We'll start with some prepared remarks, then we'll look forward to taking your questions.

I'll now turn the call over to Olin's President and CEO, Ken Lane.

Thanks, Steve, and thank you to everyone for joining us today. We appreciate your time and your continued interest in Olin.

Let's start on Slide 3 for a review of our first quarter highlights. Amid a very dynamic operating environment in the first quarter, the Olin team executed with discipline, maintaining focus on running our assets safely and reliably, removing structural costs through our Beyond250 program and preserving liquidity, all while staying firmly committed to our value-first commercial approach. That discipline translated into positive results in the first quarter and sets the stage for stronger earnings in the coming months.

During the first quarter, our Epoxy business returned to profitability, and we saw early signs of demand growth for Winchester commercial ammunition. The Iran conflict introduced significant disruption across global petrochemical supply chains. Sharply higher crude oil prices and freight rates disproportionately impacted non-U.S. producers, further reinforcing the structural cost advantage of U.S. Gulf Coast assets such as Olin's. While these dynamics did not materially benefit our first quarter results due to normal pricing lags, they meaningfully improved the outlook for the second quarter.

Looking ahead, the near-term backdrop has shifted more in favor of U.S. producers than where we were at the beginning of the year. While the duration of Middle East disruptions remains uncertain, we believe the full impact is still unfolding as global supply chains continue to tighten. We're seeing significant inventory drawdowns and deferred maintenance temporarily helping bridge supply gaps. This creates a more constructive environment as the year progresses. Olin is well positioned to navigate this dynamic environment, supported by our advantaged asset base, improving cost structure and strong cash generation. As regional customers increasingly prioritize security of supply, we have the flexibility to increase operating rates and capture value while maintaining our value-first commercial approach.

Now let's turn to Slide 4 for a deeper review of Chlor Alkali Products & Vinyls. First quarter results reflected lower operating costs driven by Beyond250 and lower-than-expected maintenance turnaround costs. Merchant chlorine demand was seasonally soft but improved from the fourth quarter with year-end customer destocking behind us. We saw chlorine demand into water treatment and crop protection rebound nicely in mid-March as U.S. temperatures warmed. Caustic soda continues to be the stronger side of the ECU. Global demand is stable against the backdrop of tightening supply and a rising cost curve for non-U.S. producers, which sets up for improved earnings as we move through the year.

Several Asian vinyls producers have declared force majeure due to limited access to feedstocks and rapidly increasing costs. This disruption constrained chlor alkali production, reducing the availability of coproduced caustic soda. While China has been less affected given its significant coal-based vinyls production, the net impact has been a meaningful reduction in global supply. Trade publications estimate that 6% to 9% of annual vinyls capacity is impacted globally. All of this drove a sharp spike in global pricing in late March with levels now moderating as inventories are depleted.

U.S. export EDC prices significantly increased since January. We expect EDC and caustic soda pricing to stabilize at higher levels compared to earlier in the year as shortages persist and production costs remain high. Olin has announced a total of $185 per ton in domestic caustic soda price increases for implementation in the first half of 2026. We continue to aggressively implement the balance of our price announcement.

Slide 5 provides a look at our Epoxy results. First quarter 2026 marks an important milestone as our Epoxy business returned to profitability. We expect full year Epoxy performance to be meaningfully improved with our return to profitability driven by several well-executed actions. Our Epoxy team has grown our European business in the wake of regional rationalizations. Our new European cost structure is on course to deliver $40 million to $50 million of annual cost improvement. Our formulated solutions portfolio continues to provide a high-margin platform for growth with a strategic focus on electronics, semiconductors and power generation. And our recent plant closure in Guarujá, Brazil, will further improve our cost structure and strengthen supply integration.

In addition to these actions, we are focused on raising prices, which have been significantly depressed due to subsidized Asian supply. Olin announced March and April Epoxy resin price increases totaling more than USD 1,200 per ton in North America and EUR 1,300 per metric ton in Europe. We expect these increases to offset the higher feedstock and transportation costs.

Let's now turn to Slide 6 for an update on our Winchester business. Winchester's first quarter performance was a significant improvement. The team took decisive actions in the second half of last year to rebalance channel inventories and position the business for improved commercial volume and price. As a result, we've regained commercial pricing traction and retail shipments are moving back into alignment with out-the-door sales. As retailer purchases align, we would expect to realize a commercial volume uplift of mid- to high single digits year-over-year.

Raw material costs remain a headwind, particularly copper as well as brass and propellant. We expect that our pricing actions once implemented, will offset the majority of 2025 cost inflation. However, we expect to continue to see cost pressure as we go through the year. We're continuing to operate a disciplined make-to-demand model that aligns to our value-first commercial approach. As a result, we're building a strong commercial backlog while tightly managing our working capital. Winchester is a core part of Olin's portfolio. With its iconic global brand, long-standing relationships with leading retailers, the U.S. military and a broad base of international customers, the business is well positioned to deliver durable long-term growth and value creation.

I'll now turn the call over to Todd for a look at our financial highlights.

Thanks, Ken. Let's review our cash flow, liquidity and financial foundation. Our top priority continues to be generating strong cash flow to preserve and further enhance liquidity. In February, we took proactive steps to amend our bank credit facilities, providing greater covenant flexibility through late 2027. As a result, we maintain full access to our revolving credit facility and $1.3 billion of available liquidity. Our debt structure is well organized with manageable tranches and staggered bond maturities over the coming years and no maturities before 2029. As is typical with seasonal working capital needs, net debt and leverage increased in the first quarter. We expect net debt to rise during the first half of 2026 as we make payments to resolve legacy litigation matters.

Now let me take a moment to discuss our outlook for expected uses of cash in 2026. First, regarding cash taxes, we anticipate receiving refunds from prior years related to Clean Hydrogen Production Tax credits under Section 45V as part of the Inflation Reduction Act of 2022. Factoring in these refunds, we expect 2026 to essentially be a cash-free tax year, plus or minus $20 million. We are proactively managing our capital spending, targeting approximately $200 million with a focus on funding sustaining capital expenditures to ensure safe and reliable operations of our assets. We expect to continue our nearly century-long history of uninterrupted quarterly dividend payments.

As we further strengthen our financial resilience, any remaining excess cash flow after the preceding capital allocation priorities will be used to reduce our outstanding debt. We remain firmly committed to managing our balance sheet in a way that maximizes our financial flexibility for the future. We anticipate ending the year with a debt leverage ratio of just above 4x. Looking forward, our goal remains to average below 2x leverage across the cycle. Our team's focus is on generating cash, strict cost control and advancing our Beyond250 structural cost reduction program and a value-first commercial approach.

Before I turn the call back to Ken, I want to comment on Beyond250. The program is designed to permanently remove structural costs, not simply trim around the edges. We have a clear line of sight to more than $250 million of cumulative savings by 2028. We delivered $44 million of structural savings last year and expect to deliver an incremental $100 million to $120 million in 2026. Every day, we continue to expand our Beyond250 scope with a focus on people and processes. We're making great progress on safety with record performance in the first quarter.

Our efficiency gains are well socialized and measurable. For example, we've nearly doubled our Freeport, Texas, time on tools. We have transformed our maintenance planning by leveraging historical data and AI tools to evolve from a reactive time-based scheduling to a proactive risk-based approach. We've streamlined the organization, reducing site headcount by 15% while reducing our reliance on contractors and improving reliability. To sum up, we are preserving a durable balance sheet, generating healthy cash flows and maintaining a prudent capital structure to drive long-term shareholder value.

Ken, let me hand the call back to you.

Thanks, Todd. Let's finish up with Slide 8 and our outlook for the second quarter. With improved pricing and seasonally higher demand, we expect to realize significantly improved earnings in our CAPV business. Our second quarter outlook includes an estimated impact from an unplanned vinyls outage at our Freeport, Texas, plant. We're expecting to restart these assets late next week. Olin's value-first commercial approach has preserved our ECU values through an extended trough and provides an attractive starting point as we begin the next cycle.

Looking out a little further, the chlor alkali supply-demand dynamics are favorable with limited additional capacity, the likelihood of further asset rationalization and a still-to-come housing and construction demand recovery. Chlor alkali is well positioned to rebound from this historic trough. In our Epoxy business, we expect to see earnings improvement with higher seasonal demand, improved pricing and continued cost improvements. We are realizing the benefits of being a strong, integrated local producer as customers seek reliable supply in the face of tremendous uncertainty. Winchester's second quarter results are also expected to improve sequentially with higher commercial ammunition volume and pricing and higher military sales. With that, we expect to deliver second quarter adjusted EBITDA in the range of $160 million to $200 million, a significant sequential improvement.

Operator, we're now ready to begin Q&A.

[Operator Instructions] The first question will come from Hassan Ahmed with Alembic Global.

Just a question on the guidance. Obviously, you guys did $86 million or so in EBITDA in Q1 and are guiding to, I mean, if I were to take the midpoint, call it, $180 million in Q2. So I'm just trying to get a better sense of bridging that $100 million or so in incremental EBITDA. I mean how much are you guys getting from Beyond250? How much of that is some of these opportunities that you guys see via the conflict in the Middle East? How much from sort of incremental, sort of, call it, caustic and EDC export opportunities?

Thank you for the question. The bridge to between Q1 to Q2 really is -- there are a lot of variables that are contributing to that. The largest one is going to be improvement in CAPV from the first quarter. That is going to be driven by improved pricing. Yes, we're going to continue to have some headwinds related to the turnaround costs, but assets are going to be running again. And so we will have higher volume in the second quarter as well as higher pricing in the second quarter for CAPV. So both of those things are going to drive a big part of it. But we are going to continue to see benefits from improved costs in the second quarter, again, netting out the impact from the turnaround.

Now we've also built into that outlook some of the impact or the impact that we currently estimate related to the outage in the vinyls assets down at Freeport. We are expecting to have those assets restarted late next week. So that is reflected there. So that unfortunately takes a little bit out, and we certainly want to make sure we get that done timely and safely because it's important to get those assets back up when we're seeing the pricing environment that we are for those products.

If you look at Epoxy and Winchester, we're going to continue to see improvement in the Epoxy business. So we'll see the seasonal uplift that we normally see for epoxy. So we are going to see improving demand. And like I said in the prepared remarks, the team did an outstanding job really trying to position Olin as the last integrated epoxy producer in Europe and being able to leverage that into a stronger market position with respect to volume growth in 2026 versus 2025.

So that's going to continue into the second quarter. And then the momentum that we saw building from Winchester and the actions that Winchester took late last year to really start to rebalance things because last year was sort of the perfect storm with higher costs, lower demand and high inventories. That really has all corrected with the exception of the cost side of that equation. But inventories are certainly back where they're much more comfortable, let's say. And demand has started to come back. So we are seeing year-over-year growth for the first time in over a year. So that is very good to see. So all of those things combined is what creates that uplift. But again, the biggest uplift is going to be coming out of CAPV.

The next question will come from Frank Mitsch with Fermium Research.

I wanted to get your thoughts on pricing as we exit Q2. I mean I think you have a fairly good line of sight on where you stand today and what your plans are in terms of getting price increases in June. And so as you think about the average Q2 price across your company versus where you're going to exit Q2, I would imagine that sets up at a higher level for Q3. So any way that you can kind of give us some orders of magnitude around expectations on the momentum on the pricing side?

Frank, thanks for joining. As you can imagine, yes, we already saw -- we'll start with CAPV. In the first quarter, we were already seeing momentum with caustic pricing coming out of the fourth quarter into the first quarter before everything started happening around the world that we saw late in the first quarter. So we're going to see that improvement really start to hit in Q2. But even with the lag that we see in some of the product lines and some of the businesses, yes, there's going to be good momentum continuing into the third quarter, and I expect that, that's going to carry through the year, to be honest with you.

So if I think about CAPV, you think about caustic, you think about EDC, those are really going to be the two big needle movers. Those price levels are going to continue to be elevated versus where we thought they were going to be at the beginning of the first quarter. We do see that continuing into the third quarter. Some of the dynamics that we've seen, though, is we had a really fast run-up in these prices, and then we saw them moderate a little bit. And what we saw happening in the market is people who had inventory, as you would expect, they were pushing a lot of that volume into the markets when the prices were spiking. And so we see that coming down. And we think that once that has played through, and you got to remember even today with talk about there being a cease fire and everything in the Middle East, Brent oil is still over $100 a barrel. And you're looking at natural gas here in the U.S. at $2.70, $2.80, so that's still a really sizable advantage for U.S. producers.

And in addition to that, you've taken basically out of the market all of that sanctioned oil that was going into a lot of assets in Asia at a significant discount that was creating a big distortion in the market. All of that is now gone. So that is going to be very constructive for pricing as we go into the third quarter. So generally speaking, I think you're just going to start to see it in Q2, but really see it even more as you go out later in the year.

The next question will come from Mike Sison with Wells Fargo.

When you think about Q2, the $160 million to $200 million, how would you sort of describe the level -- the earnings level? Are we approaching a mid-cycle sort of number? It doesn't feel like peak, particularly on volume. So just when you think about where pricing is going to set up? And then as you head in longer term, do you think some of this is sustainable where maybe '27 can -- will have structurally higher pricing and margins for the industry?

Mike, thanks for joining. As you think back to what we had said at Investor Day, we're not anywhere near what we would consider our normalized level of earnings. We definitely have seen an improvement from where we were at the beginning of the first quarter. There's no doubt about that. But even with this step-up in earnings that we're going to see in Q2 and later in the year, I think what it really reflects is what we tried to emphasize at the Investor Day back at the end of 2024, which is the fact that there is a lot of leverage in Olin's portfolio. And when you start to see demand come back and you do start to see the supply-demand balance get more normalized, as we've said, there is a lot of leverage here to the upside. So, we're not anywhere close to being at a normalized or what you may call mid-cycle level of earnings. We think that, that's still out in the future. Once we start to see things like housing recovery -- recover and infrastructure and general construction coming back in both Europe and in the U.S., which is going to happen. And I just want to remind you what I had said on the call as well, it is very constructive when you look at the outlook for chlor alkali supply and demand. The amount of additional capacity that is being added, the amount of rationalization that has happened and probably will continue to happen is going to be really constructive for us. So there is still much more leverage here in Olin still to come, and you're just seeing the beginning of some of that now. So, when you ask about long-term sustainability, yes, I mean we're in the trough, and we're going to come out of the trough. And I do think that the markets that we're in and the markets that we serve are really set up well to see that sooner than maybe others.

The next question will come from Patrick Cunningham with Citi.

You alluded to some of this price normalization, obviously, EDC being the one that's top of mind. I guess, first, what sort of sensitivity should we expect on EDC prices? Or perhaps you could help us with the price levels that are embedded within the outlook? And just in terms of the volume uplift or value rather, how much is embedded within the Braskem arrangement versus how much opportunistic volume do you have to sell here?

Patrick, thank you for the question. So, one of the things, if you look at how we're trying to manage the portfolio, we have talked a lot about having optionality, especially around our chlorine outlets and how we're able to flex that as we see markets recover, but we also want to have a diverse set of options. It's not just about having one big option. We want to have multiple options because all of these markets will recover at different rates.

EDC is clearly one that's really important for us. The strategic relationship that we announced with Braskem is one that will be very accretive for us through the cycle. But that only represents part of our EDC volume. We continue to have also part of that EDC portfolio for us that will have a spot exposure, but we're trying to get a balance there. We don't want to have everything spot. We don't want to have everything that's in a long-term contract. And we're doing that to be able to optimize and create the highest value that we can for Olin through the cycle. That is our strategy.

The next question will come from Kevin McCarthy with Vertical Research Partners.

Ken, can you provide an update on your EDC and VCM operations at Freeport? Last quarter, I think you flagged a major triennial plant turnaround. And in your prepared remarks this morning, I thought I heard reference to an unplanned outage. So, I'm not sure if those are related or unrelated, but maybe you can kind of talk through the operational outlook there in the quarter.

Sure. Thanks for the question, Kevin. Yes, we -- in the second quarter, we completed that turnaround that we had started talking about at the last earnings call. So, you may recall that we talked about that bridging across the end of the first quarter and the beginning of the second quarter. But we did successfully complete that, restarted the VCM assets in Freeport, and that all went very well. The team did an outstanding job executing that turnaround safely, a little bit ahead of schedule and on budget. So it was very good, very well executed.

Unfortunately, we've had an unplanned event here recently that has brought down the Vinyls assets at Freeport. And as I said earlier, we're in the middle of running through our RCA, making sure that we've got everything established to be able to restart those assets safely. And the current plan is to restart those assets late next week. And I've got confidence that the team is going to be able to do that and execute on that as well as they did with the turnaround. So all of that looks to be coming back into good condition and good shape here in the next week or so.

The next question will come from Josh Spector with UBS.

I wanted to ask broadly just about caustic dynamics here. I think -- I mean, obviously, you're going for additional pricing, and you've alluded to that. But when I look at Asia pricing relative to U.S. pricing, I mean, the U.S. seems to have moved to a bit of a premium here. And typically, caustic production is going to increase as PVC production increases over the next few months. So really, the question is, how do you expect North America prices to move higher if North America is going to maybe have more caustic to deal with in a few months and the manufacturing backdrop isn't that strong. I guess what am I missing on the pricing dynamic that pushes that even higher from here?

Josh, thank you for joining us. There are a lot of dynamics going on in the caustic market that I think people probably underestimate and thinking linearly about what's happening and saying what happened in the past is what's going to happen in the current environment. There are so many things that have changed when you think about freight rates, you think about the disruptions just in the supply chains. So, I'll give you an example. There used to be caustic coming into the East Coast from Europe. There was caustic coming in from the West Coast, from Asia, and that's pretty much gone now. So, all of those dynamics are very different than if you just look at a price in a reported index in Asia or somewhere else. It really becomes, well, what's the availability of product that drives the pricing as much as looking at the arbitrage because you've got a big step-up in freight costs as well.

So, that is going to be driving the dynamics here for really the foreseeable future. I don't see that changing. But I want to back up to the first quarter because we're all focused on what's happening just right now. Even back between the fourth quarter and the first quarter with stable demand, we were already seeing price momentum with caustic. There was an overcorrection last year in caustic. The market was tighter than what people believed, and you saw that begin to recover even before what we see happening currently in the Middle East. So, all of that, I still believe is constructive for the pricing environment around caustic. And so we're still going to be bullish as we look forward because we think that nothing has fundamentally changed. You've taken capacity off, demand is relatively stable, costs are higher, prices should go up in that environment.

The next question will come from Matthew Blair with TPH.

Ken, I think you mentioned that 6% to 9% of global vinyls capacity is currently offline due to Iran war. Is that also a good estimate for global ECU capacity that's offline? And perhaps more importantly, in terms of the duration, how quickly do these assets return? And how quickly could supply chain normalize if there was a true ceasefire peace deal announced tomorrow?

Well, maybe I'll start with your second question because I think a ceasefire has already been announced and it still is disrupted. So, I think this is going to linger for quite a while. And if you look at the supply chain disruptions in the past, even -- it's not a light switch. You don't turn this back on and everything goes back to normal. Ships get out of position, feedstocks are not available for a period of time, and that lingers for weeks, months typically. So, that's why I'm optimistic that structural support for higher prices and benefits for companies like Olin who have assets in regions that have good access to low energy and raw materials is going to be constructive for us. I don't see that really reversing in the short term. I think it's going to take a little bit longer.

Going back to your first question, the 6% to 9% that's been reported for vinyls capacity that's offline, yes, I mean, if you don't have a place to put the chlorine, then the ECUs are not going to be produced. So yes, I do believe that, that is a good proxy for thinking about that.

The next question will come from David Begleiter with Deutsche Bank.

Ken, on your vinyl strategy, has the conflict in the last 2 months influenced your thinking on how you pursue a vinyl strategy down the road? And just a housekeeping item on Slide 15, the turnaround expenses, does the Q2 forecast of $42 million include the outage, the unplanned outage? And if not, how much is that unplanned outage in vinyls?

David, I appreciate you joining us. So, the vinyl strategy is not impacted by what's going on in the world today. It's still an important market for us and one that we are focusing on longer term to make sure that we have access to that. When we think about all of the options that we've discussed, extending the current agreement that we've got with our fence line customer Freeport is still a priority for us, but there are other good options that we are looking at. And one thing that I would say is this probably, I shouldn't say probably, this does make some of the other options around partnerships look more attractive, especially to some of the partners that we're working with.

So, that is a good thing, but it doesn't change our focus on wanting to grow in the vinyl space longer term. So, the strategy is still intact. It's just we've got to continue to work through the options that are in front of us.

The question that you had around the turnaround expenses for the second quarter, that does not include the unplanned event that we're talking about at Freeport. That would be an incremental impact in the second quarter that, again, we've reflected in the outlook that we gave.

The next question will come from Arun Viswanathan with RBC Capital Markets.

I guess what -- my main question is really on the duration of the earnings power here. So, you're guiding to about $180 million for Q2. Various peers of yours in the space have given various lengths of time for normalization between, call it, 3 to 6 months. Is that kind of how you're looking at things? And I guess you do have some capacity that's entering the industry in the next 6 to 12 months from debottlenecking as well as a new plant coming on maybe in a few years.

Just wondering if you're still feeling that caustic is going to be tight through that period or ultimately, if we will settle in a little bit of an oversupplied situation. And if we do kind of put all that together, does that mean that maybe we're kind of looking at a year that's kind of twice your first half? Or does that -- do you see upside to that?

Yes. So listen, I'm not going to get into the business of trying to speculate how long this is going to go. I did say earlier, and I do believe this is going to carry through the year this year, at least the impacts because costs are going to be higher. I think people are probably going to be expecting a higher security premium when you think about supply coming out of other regions that have been, frankly, dumping product into Europe's and the U.S.'s markets. I think we're seeing a premium for local supply. I think that's going to continue. So, even if you see energy prices settle down, there are going to be longer-term kind of hangover effects here that I do think are going to be beneficial for Olin. There's no doubt about that.

But going back to what I had said earlier, too, just around the setup for looking at coming out of the trough and supply-demand outlook for chlor alkali is much more positive than I think maybe you're thinking right now because I'm not I'm not sure you got to factor in all the pluses and the minuses that have happened over the last year, 1.5 years, 2 years even with assets that have been closed in Europe, in the U.S. and Latin America. We've seen assets closed in Asia even. And so you look at that, plus there is limited -- there's really very little new capacity coming online between now and the end of the decade. Again, I feel very bullish about the outlook for the markets that we're playing in and I don't see any reason to have a different view on that.

The next question will come from John Roberts with Mizuho.

For your export EDC business, how are you thinking about the competition from China? Most of their coal-based capacity is inland and their coastal capacity is probably ethylene constrained. So, how do you think the dynamics there are going to play out in the next few months?

It's a very good question. Obviously, one that's important for us with the EDC business that we've got. We are going to see a step-up in volume in the second quarter and prices have moved up significantly from where they were. If you just think back to last year, the price really got overdone and was dropping far more quickly than it needed to in the environment that we were in, okay? We are where we are. Things have improved since then and have gotten to a healthier level in terms of prices that we see. The fact that you just mentioned that a lot of that capacity is inland in China, again, will increase the cost to get that EDC to market. Our costs have gone down. They've not gone up. So, we're able to be able to serve the market more competitively at a better price.

And so that is going to be constructive for us as we look forward to the second quarter and the third quarter. And again, I think that's going to continue through the end of the year. Pricing is going to get back to a more what I would consider a more normal level for where we are in the supply-demand environment because things got overdone. And I mentioned this just a few minutes ago, the sanctioned oil that's sloshing around in the market, that now has been curtailed. The volume that's still there is going to be priced much higher than it was previously, and that is going to be beneficial to us.

The next question will come from Vincent Andrews with Morgan Stanley.

Yesterday or the other day when Chemours reported, they indicated that they've signed an agreement with you for the 2028 plus period instead of building the plant that they announced back in December of 2024. So could you help us understand the impact to you? Are those tons going to be more profitable, less profitable about the same as what -- how you're monetizing them today?

Vincent, thank you for joining us. Any time that we can do a strategic partnership like we've done here with Chemours, and it is similar to Braskem, where we're working with an industry leader like Braskem, industry leader in vinyls in Brazil. You've got the industry leader in Chemours for titanium dioxide. And we've created something that is accretive for Olin. This is a long-term supply deal that will start in 2028. These are the sorts of optionality that we want to put in place in our portfolio that gives us the ability through the cycle to generate stronger earnings. And certainly, we're very happy with the relationship with Chemours and looking forward to expanding that in 2028. But as you can imagine, we're not going to disclose any further details around that agreement, but it certainly is a win-win for both Olin and Chemours.

As there are no further questions, this concludes our question-and-answer session. I would like to turn the conference back over to Ken Lane for closing comments.

Thank you very much. And listen, we appreciate everybody's time this morning. We appreciate your interest in Olin, and we look forward to giving you an update at our second quarter earnings call later this year. Thank you very much. Have a safe weekend.

Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to the Olin Corporation's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve.

Thank you, operator. Good morning, everyone. We appreciate you joining us today to review Olin's fourth quarter 2025 results. Please keep in mind that today's discussion, together with the associated slides as well as the question-and-answer session that follows, will include statements regarding estimates or expectations of future performance. Please note these are forward-looking statements and that Olin's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described without limitations in the Risk Factors section of our most recent Form 10-K and in yesterday's fourth quarter earnings press release.

A copy of today's transcript and slides will be available on our website in the Investors section under past events. Our earnings press release and related financial data and information are available under press releases.

With me this morning are Ken Lane, Olin's President and CEO; and Todd Slater, Olin's CFO. We'll start with some prepared remarks, and then we'll look forward to taking your questions. In order to give everyone an opportunity, we will limit participants to 1 question with no follow-ups.

I'll now turn the call over to Olin's President and CEO, Ken Lane.

Thanks, Steve, and thank you to everyone for joining us today. Let's start with Slide 3 and review our fourth quarter highlights. As we previously announced, our fourth quarter came in significantly below our expectations.

In December, we experienced operational issues related to an extended turnaround of our Freeport, Texas coordinated organics assets and third-party raw material supply constraints, both of which impacted our core alkali assets. At the same time, we also experienced a sharp decline in chlorine pipeline demand in an already seasonally weaker quarter.

During the quarter, we were able to preserve our ECU values by staying disciplined with our value-first commercial approach, and we also announced the long-term EDC supply agreement with Braskem, which provides a higher value to both parties by integrating the low-cost producer of EDC with the leader in PVC in Brazil.

In addition, we've expanded our infrastructure footprint in Brazil, which enables us to grow our caustic sales there in 2026. We -- in our Epoxy business, we were able to contract for significant growth in our European business, which we'll begin to benefit from in the first quarter of 2026.

This is a result of our commercial team's successful strategy to position Olin as the last integrated supplier of Epoxy in Europe, providing reliable, secure supply to local customers in the face of continued headwinds from subsidized Asian producers.

In our Winchester business, we took aggressive action to accelerate inventory reductions across our system and began efforts to rightsize our cost structure in response to lower commercial ammunition demand. Cash generation is a high priority for Olin, especially in the trough environment that we're in. I'm very proud of how our team has responded. And through actions that we took, we were able to generate $321 million of operating cash flow and hold net debt flat versus year-end 2024.

Let's turn to Slide 4 for a closer look at our Chlor Alkali products and Vinyls results. Macro conditions remain challenging. Merchant chlorine demand remains under pressure through this extended trough as subsidized Asian chlorine derivatives blood export markets. Since 2019, China exports of titanium dioxide, urethanes, epoxies, crop protection chemicals and PBC have grown 300% to 600% placing significant pressure on U.S. chlorine derivative customers.

As you would expect in a trough environment, we are already seeing core alkali capacity rationalization in Europe, Latin America and the U.S., which should accelerate operating rates as demand recovers. Olin has done a great job of preserving our ECU values and remains committed to our value-first approach, and we are well positioned when markets recover from the trough.

As we look ahead to the first quarter, will continue to face headwinds related to power and raw materials. As a result of Winter Storm Fern, we proactively shut down several of our Gulf Coast assets, which will increase our first quarter costs. In addition, we'll see higher turnaround costs as we begin our VCM turnaround at our Freeport, Texas site. This is the single largest turnaround that Olin executes and occurs every 3 years.

Global caustic soda demand remains healthy, led by alumina, water treatment and pulp and paper. Olin ended 2025 with very low inventories, and we're seeing good momentum on our caustic soda price increase. As seasonal demand returns this spring, already low inventories and planned industry turnarounds are expected to further tighten caustic supply.

Our full year 2026 chlor alkali outlook remains challenging. We expect global vinyls pricing will remain under pressure. Rising U.S. natural gas, power and feedstock costs will present a headwind in contrast to falling global oil prices serving to erode the U.S. cost advantage.

In the near term, Olin faces stranded costs of approximately $70 million, resulting from Dow's recent closure of their Freeport propylene oxide plant. This cost burden will be offset by our Beyond 250 structural cost reductions, which I'll discuss shortly.

Now let's turn to Slide 5 for a look at our Epoxy results. Our fourth quarter Epoxy results sequentially increased due to improved product mix, allylic and Aromatics margins, partially offset by higher turnaround and seasonally lower demand. As we look ahead to the first quarter, we do expect our Epoxy business to return to profitability, although at a low level. This will be realized through actions we have taken by growing our participation in the European market realizing lower costs at our Stade, Germany site and lower turnaround costs.

As we look out further, structural changes in our cost position, recent European epoxy chain plant closures and continued growth in our Formulated Solutions portfolio will support a return to profitability for 2026 as well.

Over the past 3 years, Olin's Epoxy business has remained focused on cost reductions. In that time, we've reduced our global epoxy cash costs by about 19%. Our most recent action was this month's closure of our Guarujá Brazil epoxy plants. This shutdown is expected to deliver $10 million of annual structural savings.

Also in 2025, we continue to deliver on our Formulated Solutions sales growth. These solutions enable AI chips to better manage heat and conductivity that allow lightweight wind blades to exceed 500 feet in length and that serve as adhesives in some of the most challenging environments and application. We will continue to benefit from that growth in 2026.

Now please turn to Slide 6 for an update on our Winchester business. During the fourth quarter, Winchester took aggressive action to adjust its operating model to reflect lower commercial ammunition demand and significantly reduced inventory. As expected, we realized higher military and military project sales, which was offset by these lower commercial sales and higher metals and operating costs.

Winchester's first quarter priority will be the implementation of our commercial ammunition price increase. Our new pricing is expected to offset the majority of 2025 cost escalation. As we begin 2026, commercial shipments will continue to be made to order and subject to our increased pricing.

As we look back at 2025, we've seen a significant decline in demand for commercial ammunition, back to pre-COVID levels. In response, our Winchester team has taken the necessary actions to align our production capacity with today's reduced demand. We've eliminated shifts, reduced headcount and restricted overtime across all Winchester plants.

At the same time, ammunition imports have slowed dramatically in the face of U.S. tariffs as high as 50%. Last year, imported ammunition satisfied approximately 12% of U.S. demand. In the most recent September import data, imports from Brazil, which typically is the largest importer, have disappeared completely.

Domestic and international military sales continue to grow as NATO countries expand their defense budgets and the U.S. increases its own defense spending. Our next-generation squad weapon project remains on schedule and will be the most modern and sophisticated small-caliber ammunition plants in the world.

Winchester's 2026 outlook still faces significant cost headwinds from higher copper, brass and propellent costs. Winchester 2026 tailwinds include expected sales growth across domestic military, international military and military projects. Commercial volumes and pricing are also expected to improve during 2026.

Retail sales have begun to show year-over-year improvement, albeit over a low baseline and retailer inventories have come down significantly.

Let's turn to Slide 7 for a high-level view of our Beyond250 structural cost savings program. Olin's Beyond250 structural cost reduction program focuses on the identification and removal of inefficiencies. During our 2024 Investor Day, each Olin business made a cost-savings commitment, and we are focused on delivering these savings as quickly and efficiently as possible while maintaining safe and reliable performance of our assets.

In 2025, we delivered $44 million in structural cost savings and we expect to add an incremental $100 million to $120 million of annual beyond 250 million savings during 2026, spread across our 3 businesses. As I discussed last year, we've enlisted outside expertise to help review our organization and processes against industry best practices. We've begun to improve efficiency at our largest site in Freeport, Texas.

By streamlining our work processes, we've already been able to achieve a meaningful reduction in staffing. Through this exercise, we've identified many key performance metrics and gaps to close. For example, our contractor time on tools, was well below industry best practice and our overall reliance on contractors was excessive.

With our new organization, work processes and performance tracking, we have clear line of sight to deliver these additional cost savings in 2026. Our Freeport plant is the pilot for this improvement program, which we're now rolling out across our other global sites. At the same time, Winchester has been rightsizing their staffing and operations to reflect lower levels of commercial ammunition demand. Both of these efforts combined have resulted in a reduction of more than 300 employee and contractor positions during the second half of 2025.

We expect to realize a similar level in 2026, as we implement the same efficiency measures at our other sites. In the first quarter of 2026, we'll begin to see the benefits of our new supply agreement at our Stade, Germany site. We expect to realize $40 million to $50 million of savings related to that in our Epoxy business through the year.

As mentioned earlier, Dow's closure of its Freeport propylene oxide plant has created a $70 million stranded cost headwind for Olin. By optimizing our power supply, we've already managed to offset approximately $20 million of that stranded cost. Earlier this month, we announced the closure of our Epoxy production plant in Brazil. We'll be able to more cost-effectively serve our customers there with supply from either Freeport or Stade, both of which are vertically integrated with better cost structures. As a result of this action, we expect to realize a $10 million annual benefit.

With the progress we made in 2025 and visibility of savings in 2026, we're confident we can exceed the $250 million savings commitment we've made during our 2024 Investor Day.

Now I'll turn the call over to Todd for a look at our financial highlights.

Thanks, Ken. Let's review our cash flow, liquidity and financial foundation. Despite the challenges we encountered that impacted our adjusted EBITDA during the fourth quarter and throughout 2025, and I'm pleased to report that we successfully achieved our 2025 cash flow and working capital objectives. In the fourth quarter, we generated approximately $321 million in operating cash flow, which enabled us to keep our year-end net debt at a level comparable to where it stood at the end of 2024.

Throughout 2025, our team's proactive working capital reductions contributed $248 million in cash, excluding the timing of tax payments. As we closed out the year, our available liquidity stood at $1 billion. Preserving and enhancing liquidity continues to be a top priority for us. particularly as we navigate this extended period of lower demand in our businesses.

We continually review all sources and uses of cash with the goal of cost effectively, maintaining adequate liquidity to support our business. Our debt profile remains managed. Early last year, our team executed a well-timed bond issuance and debt refinancing, which provided a leverage-neutral extension to 2033 of our nearest bond maturities as well as an extension of our senior bank credit agreement from 2027 to 2030.

Importantly, we have no bonds maturing until midyear 2029. Our debt structure consists of manageable tranches with staggered maturities in the years ahead. We remain firmly committed to managing our balance sheet in a way that maximizes our financial flexibility in the future.

Now let me take a moment to discuss our outlook for expected sources and uses of cash in 2026. First, regarding cash taxes, we anticipate receiving refunds from prior years related to the clean hydrogen production tax credits under Section 45B as a part of the inflation Reduction Act of 2022.

Factoring in these refunds, we expect 2026 to essentially be a cash-free tax year, plus or minus $20 million. We are proactively managing our capital spending targeting approximately $200 million with a focus on funding sustaining capital expenditures that ensure safe and reliable operation of our assets.

We expect to continue our nearly century-long history of uninterrupted quarterly dividend payments. As we further strengthen our financial resilience, any remaining excess cash flow after the preceding capital allocation priorities, will be used to reduce our outstanding debt. As a reminder, due to our normal seasonality of working capital, we expect net debt to increase during the first part of 2026.

We remain focused on minimizing our typical seasonal inventory build. Our teams remain dedicated to generating cash. maintaining strict cost discipline and supporting our beyond 250 cost savings. We are committed to maintaining a prudent capital structure with a strong balance sheet and robust cash flows.

Ken, I'll hand the call back to you.

Thanks, Todd. Let's finish up with Slide 9 and our outlook for the fourth quarter.

We expect to deliver first quarter earnings lower than fourth quarter 2025. The main drivers behind that are continued seasonally weaker demand and higher costs in our CAPV business, as we previously discussed.

We're seeing positive momentum with caustic pricing and expect to see more benefit from that as we move through the year. Epoxy results will be sequentially higher, driven by higher volumes and lower costs in Europe from the new Stade contract taking effect, partially offset by a less favorable product mix.

Winchester results are expected to modestly improve from the fourth quarter, with higher commercial ammunition volume and pricing to offset rising copper and brass costs as well as lower operating costs from our new operating model. While we're not satisfied with our results, everyone at Olin is focused on executing our value-first commercial approach, delivering our beyond 250 cost reductions and controlling what we can control to drive better business outcomes going forward.

Our team is committed to maintaining leading positions across our businesses, and I'm confident that we are well positioned for the future.

Operator, we're now ready to take questions.

[Operator Instructions]. Our first question comes from Aleksey Yefremov from KeyBanc.

You described a sharp decline in chlorine pipeline demand in Q4 as one of the biggest headwinds and I'm curious if it remains a large headwind in the first quarter? And if so, when do you expect that chlorine demand to recover? Obviously, consultants are describing a more competitive merchant chlorine market? Is this part of the story here? Or is this something idiosyncratic to your customers and you still have those customers and how you're seeing market share or not.

Thank you for your question. So yes, listen, we saw the decline that we were referring to for the chlorine pipeline demand. That really happened in December, late in December. As you can imagine, it's pretty easy to reduce that offtake when you're on a pipeline. So we saw that happen -- we think it was primarily related to destocking. We were already seeing the seasonally lower demand. It just right at the end of the year, it went down even further.

Now that was a contributor to the lower earnings, but also the costs were a larger contributor to the earnings decline that we had talked about for the quarter. we're going to still see seasonally low demand in the first quarter of 2026. I don't expect to see what we saw at the end of December happened again in the first quarter. But we're not going to see a large bounce back in demand until we get into the warmer weather months and you start to see a recovery and water treatment demand and that sort of thing. That won't happen before second quarter. So -- we're still going to be very aggressive on maintaining our costs and making sure that we're being disciplined around our operating rates because that's what we can control.

And -- the other thing that I want to mention is just related to caustic. There's no issue with demand on caustic. What we see happening on caustic is we don't have the volume to sell. The market is tighter than what people think, and we actually are going to see a little bit lower volumes in the first quarter on caustic. That's an availability issue, it's not a demand issue.

Our next question comes from David Begleiter with Deutsche Bank.

Ken, 1 of your competitors has announced some capacity closures in North America. Can you discuss how you think the impact of those closures will be felt and how beneficial it could be to Olin in 2026?

Good morning, Dave. Thanks for joining us. So listen, like I had said in the prepared comments, we have been seeing rationalization of capacity occurring over the last 12 to 18 months in pretty much all regions of the world. So it's not surprising when you're at the trough that you're seeing less cost competitive assets being shut down. And our view has been that operating rates will improve supply/demand balances will improve quicker than what you may be seeing in a lot of the publications because of that. That's what happens in every trough, and this is just another example of that. So again, while we're in a situation of this longer trough has been exasperated by the additional capacity that's been added in Asia, you are starting to see those rationalizations occur, demand has not come back. And when demand does recover, and it will 1 day, I know sitting here today and they feel like it won't, but we're ready when it does.

We're doing the right things to prepare our assets. We made a step change in our performance in 2025 in terms of safety, and that goes hand-in-hand with reliability. Those are very big focuses of our organization. And so what we've got to do is be really good at having the most cost-competitive assets, the most reliable and the safest assets to be able to supply the markets that we serve.

Our next question comes from Kevin McCarthy with Vertical Research.

Ken, can you comment on how military demand trended at Winchester in 2025, how much of that might have been up versus the pressure that you discussed on the commercial side.

And looking ahead, I think you made a comment that maybe commercial demand is starting to trend positively on a year-over-year basis. So what is your outlook in that regard for 2026, please?

Good morning Kevin., Yes. So listen, what we saw in 2025 was significant growth in revenue related to military, both domestic and international -- now a lot of that gets skewed by the project revenue that you see related to the next-generation Swad weapon facility at Lake City. That project is going very well. I do expect -- we're even sitting here today, we're a little bit ahead of schedule.

And so we feel really good about that project being on track to continue to realize growth related to that even in 2026. If you just think about the ammunition sales, yes, we did see growth even in the ammunition sales. The highest growth would have been in the international military space. that's growing off of a small base. So as a percentage of our total military sales, it is a smaller percent of military than the domestic military, but we expect to see that continue to grow in 2026.

All of that gets diluted by that project revenue though that you see coming through related to the Lake City project. We are seeing the, I guess, the fruits of some of the actions that we have taken in the second half of last year by being more disciplined and what we're producing and shifting our model to more of a make to order. If we don't see the orders, we're not making the routes.

We've got to have visibility to that demand and so that has helped us pull our inventories down. We've seen in the value chains at the retailers, their inventories have come down. And now we've got to start the process to be able to rebuild our margins. We've got to start passing through a lot of these cost increases that we saw in 2025 that are continuing into brass and copper are real headwinds for us. And so that has got to get absorbed in the market.

And so we're being -- again, we're being very disciplined about implementation of these price increases and where we're not seeing that, then we're not going to be making the routes. So we're going to continue with that.

The green shoot that I'll comment on, though, is that we are seeing -- since the end of December, and it has been continuing, we are seeing weekly improvements in out-the-door sales at retailers. And so that is a very positive sign. I think that you are starting to see things get more balanced in that market.

And Winchester being the leading brand, we're going to be very disciplined because we're going to leverage that brand value. We're the leading brand in the industry, and we've got to make sure that we get the margins that reflect that.

Our next question comes from Patrick Cunningham with Citi.

Just in terms -- last year, you started the PVC tolling arrangement. Now you have the Braskem any updated thinking on additional downstream participation in Chlorovinyls, whether it be expanded tolling arrangements or perhaps investing in your own PVC assets?

Good morning, Patrick. Listen, Vinyls obviously, is a very important market for us. As you know, we've talked a lot about that. We continue to participate in the PVC market at a low level of volume, but it is giving us the ability to see and learn a lot of things around the customers, around the product portfolio and really educate ourselves on that decision.

We haven't taken anything off of the table in terms of our options that we are considering and that we're looking at. We continue to make very good progress on looking at potential expansion into PVC, which would include joint ventures, some sort of a joint investment or partnership. We're looking at technology providers and potential locations to be able to execute that. That all is underway and that all is in flight, but we're not taking any option off the table, including continuing the relationship that we have today with our fence-line customer at Freeport, Texas. So all of that is still in play.

Long term, we are very optimistic around what we see in the PVC market. Yes, today, there's been too much capacity added. The demand has not come back, particularly in China. But that is going to get corrected over time. And so we're talking about a 2030-2031 sort of timing for doing anything here. that's an eternity right now, okay? That -- a lot of things are going to change and look different by the time we get there. So we're still looking at those things.

We haven't made any final decisions. We've got time to be able to do that. As we make progress, we will keep you all informed. But today, there's not anything more definitive than we could say about that.

Our next question comes from Hassan Ahmed with Alembic Global Advisors.

Todd, just wanted to dig a bit deeper into the Q1 guidance you guys have given. Maybe you guys could sort of took it through in terms of a sequential bridge. What I'm just trying to understand is that Back in the day, you guys would talk about $11 million Btu swing in nat gas prices being around $45 million to $55 million worth of an annualized EBITDA swing. And this is obviously before you guys shut down some capacity and the like.

So I would love to hear where that figure sits. And if Q1 had relatively normal nat gas prices, what your guidance would have looked like and what your guidance would have looked like in the absence of maybe some of the weather-related capacity shutdowns you guys have done. And if I could also add on what that guidance would have looked like in a relatively normal sort of copper pricing environment?

Good morning, Hassan. Thank you for joining us. Listen, I know that some of that is what we've done in the past, but I will just tell you that I think when you start giving out those kinds of metrics, there tends to be too much people lean on those too much and they start trying to reconcile things with other data that they don't have. It ended up creating more questions and confusion that it's worked.

So let me give you a little bit of a bridge on a year-over-year basis because that's probably a cleaner way to think about this than sequentially just because what we had in Q4 is not necessarily the same thing that we see in if you think about it year-over-year, one of the biggest headwinds that we've got in our chlor-alkali business is a significant increase in turnaround spend year-over-year. That's $40-ish million year-over-year. first quarter of 24 -- 25 versus first quarter of '26.

The other thing is we are seeing significantly higher costs for power and natural gas. -- you can go look at that, and you can see what the numbers are, but both are going to be higher this year. Including now the impact of this winter storm Fern, we did proactively shut down some assets, but at the same time, we were still running some assets. So the power that we were consuming was at a higher price, but there are also costs associated with not running assets during that time, when we were shutting those assets down.

Now just to give you an idea, we're still completing the restart of those assets. So not everything is back online, but we should be, by the weekend is my expectation. The other thing related to that winter storm Fern is our Oxford, Mississippi facility with Winchester is still down. You've probably seen some of the news coverage around Mississippi, they were sort of the direct head of that ice storm Employees are still not able to get to work. In some cases, we're not seeing many people being able to get in to that facility. So that's going to continue probably into next week realistically.

So those headwinds, obviously, we did not have year-over-year. Epoxy is going to be an improvement. Winchester is down, net-net, those are probably about a wash, if you think about the first quarter of '25 versus '26. So that's how I would kind of steer you on that without trying to give you numbers that you're going to screw yourself in the ground around because there are just going to be other variables that you're not going to be able to figure out. So hopefully, that helps.

Our next question comes from Frank Mitch with Fermium Research.

I may have missed this in the past, but I wanted to ask about this $70 million stranded costs for the PO-related closure. Dow announced this back in May of 2023. And so I -- obviously, you've known about it for a long time and could plan for it, et cetera, that $70 million sounds like a very large number. Can you help explain that to us, to me in particular.

Listen, yes, we have known about this for a long time, and we've been planning it and we talked about this at our Investor Day, we knew that this was coming -- but you don't take the costs out until you shut the assets. And so those assets are being closed and wound down as we speak.

So as we go through the year, we're going to have to find ways to be able to offset that. And that's -- that was the basis for us creating Beyond250 is that we've got to find ways to be able to take those costs out. The way that we were talking about this, I think previously as well is that asset and the sales from that asset didn't generate any margin for us. It was sort of a net 0 effect for us in terms of the P&L. But that doesn't mean that there would not be stranded costs with that. We were aware of that we've got to get after that. That is a very clear focus for us to be able to do that as we wind those assets down. But that is going to be something that happens over time. It doesn't happen like flipping a switch.

Our next question comes from Josh Spector with UBS.

I just wanted to ask, if you look at fourth quarter and first quarter in chlor-alkali and you just look at the things which are related with extended downtime third-party outages and your own inventory actions. What was the impact in fourth quarter? And what's your baked-in impact in first quarter?

Josh. Well, like I said, there are a lot of things -- there are a lot of variables that are going into that, including unplanned outages in our system. And so when we look at that -- the biggest impact from that is simply the fact that we ended the year with very low -- and I mean like wet tank bottoms on caustic inventories. And so that is serving now to present a little bit of a volume issue for us in the first quarter related to being able to meet the demand that we see.

And that's why we're so confident in the momentum that we see around caustic pricing, but you're really -- it's really difficult to give you any more details than that. I think there's a lot of misconception out there about the marketplace and what we see in terms of supply and demand, things are tighter than what people believe.

And I think that's one of the things that we are going to continue to realize as we go through the first quarter and into the second quarter, we're going to start to see that movement in pricing that reflects the situation in the market.

Our next question comes from Matthew DeYoe with Bank of America.

I feel like the prior kind of commentary for 2026 epoxies, we were expecting something around $80 million in cost savings, of which over half was supposed to come from just the Dow contract labs Stade.

Clearly, you're talking about modest profitability -- this wouldn't be the first case, productivity is lost through the cycle, but I'm just trying to clarify if that's what's happening here or if we should expect those savings to be more ratable in I'll let you expand from there.

Listen, so what we had said back at Investor Day, that $80 million, remember that was our cost-out target for 2028. So that -- you're going to realize a very big chunk of that $40 million to $50 million is going to be realized in 2026. So you are going to see Epoxy last year, $50-ish million EBITDA negative.

We're going to be positive this year. I mean I do expect that that's going to be the result in 2026. So you're going to see a meaningful improvement in our earnings. Most of that are things that we're doing to help ourselves in cost reduction and efficiency improvements. Just to be clear, we're not seeing any significant improvement in the Epoxy market. Demand is still subdued. Margins are still weak. That environment has not changed.

So all of this improvement that you're seeing is a result of what we've done. And so it's not getting lost anywhere. You're going to see that positive impact coming through in 2026.

Our next question comes from Mike Sison with Wells Fargo.

Just curious when you think about improving EBITDA sequentially throughout the year, what do you think needs to happen? Obviously, demand would be great, but you have a lot of cost savings. Can you maybe just give us a feel of what could happen heading into 2Q, 3Q, that could really maybe improve the EBITDA level from where we're at now.

Well, listen, like I have said, we are going to be really focused on everything that we can do to ensure that we're becoming a more efficient company, reducing our costs in the face of a very difficult market that we're in today.

I am more bullish on what we expect to see around caustic pricing. The cost reductions, you're going to start to see that come through here in the first quarter, particularly around the Epoxy business. We've talked a lot about that. And then frankly, we've got to execute on this turnaround in Freeport. It's starting here in the first quarter, at the end of the quarter, and it's going to go into the second quarter. So that headwind is going to stay there in Q2 related to the VCM turnaround.

So we have to execute that very well. And the team has done a great job preparing for that, planning for that. I've reviewed where they are in terms of being prepared, and we've got to make that a reality now. So execution, running the assets reliably and safely and executing this turnaround, those are the things that we can control, and that's what we're going to be really focused on to deliver those cost reductions.

And then as we see demand recover in Q2 and pricing improve in Q2, that's going to give us some momentum, but we're not going to quantify that at this point.

Our next question comes from Matthew Blair with TPH.

Could we circle back to this mention of higher energy costs. I think it was on Slide 9. We normally think of Olin as fairly hedged on a quarter-over-quarter basis. So is this just a function of rolling to a new year? Or has anything changed on your overall hedging strategy?

Matthew. Todd, do you want to take that one?

Yes. No, great. Thanks for the question. Yes, you're right. We are -- we continue to be a hedger. One quarter out, we're very heavily hedged generally on a rolling 4-quarter basis. And so without the spike in natural gas that you saw associated with the winter storm and cold weather here in January, we would have expected based on our hedges that natural gas and our power costs would have been higher.

Candidly, that will be exacerbated by the unhedged component here in January associated with that spike in gas price that we saw.

Our next question comes from Jeff Zekauskas with JPMorgan.

Can you quantify either the volume or the EBITDA benefits of the Braskem EDC arrangements for 2026. And for Todd, for 2026 for the full year, do you have any cash flow or free cash flow or working capital objectives.

Jeff, thanks for the question. So listen, we will get specific on the Braskem arrangement. Again, that is 1 where it's a great partnership that we've created there. Like I said, we brought together us, Olin as the low-cost producer ADC, together with the PBC leader in Brazil. And this is going to create value for both of us. So it's going to allow us to get a higher value for our ADC versus selling it on the spot market and the export spot market. And it's going to allow them to have a better cost position to be able to compete with their PVC in Brazil.

The other component of this, though, is around caustic. So we do have a larger footprint now on infrastructure with caustic infrastructure in Brazil. So we've also inherited a lot of that infrastructure in terms of tanks and ports and access to be able to move caustic into the region. And so that's going to help us probably even more so than the EDC side of this.

EDC prices have come down so much through the year. If you just think about -- if you go back to the first quarter of last year and that bridge that we were building earlier, vinyls pricing has come down significantly from the first quarter of 2025. And so as prices recover, that's going to be more of a tailwind. But we're not projecting any significant improvement in vinyls pricing in the near term.

So I would say, let's not get over our skis on that at this point. It's probably more of a caustic story, and we'll see a meaningful increase in in our caustic sales into Latin America in 2026. We're not going to quantify what that looks like, but that's going to be a growth market for us.

Yes. And Jeff, talking about cash flow and working capital. As we look to 2026 compared to 2025, we will see a real tailwind associated with cash taxes. I'd say roughly in 2025, we spent $167 million in cash taxes. And so we would expect 2026, I said to be a relatively cash-free tax year, plus or minus $20 million. So that's a nice tailwind as we move into 2026. However, we did reduce working capital, excluding taxes by $248 million.

We would expect that you will see some normal seasonal build in working capital in the first half of 2026. But we will be very disciplined, as you've heard, around inventory and our seasonal inventory build -- and we will be very focused on continuing to maintain that working capital discipline that you saw in 2025. And so that is going to be something that we think we can maintain the levels of inventory that we have achieved in 2025 and 2026, if not improve upon that.

Our next question comes from Peter Osterland with Truist Securities.

I just wanted to follow up on the Winchester discussion. Just given the plans you've laid out on pricing and cost actions and acquisition synergies. How much visibility do you have for margin improvement in the business during 2026? I mean I guess if you assume commercial demand and raw material prices don't meaningfully improve. Can you drive segment margins higher for full year '26 just through self-help?

Peter. Thank you for the questions. So there's a couple of ways I want to answer that question. One is we have taken cost out of Winchester. So if you you go back to the fourth quarter, we did take out shifts. We have reduced staffing levels to be able to reflect that lower demand that we had talked about. Demand has gone back to kind of the pre-Covid levels. So there's a big decline in that in the earnings of Winchester that is related to volume.

The margin side of it is certainly related to a big part of that are cost increases. Yes, there were some concessions around pricing as retailers had high inventories, and there was promotional pricing that was done to move that inventory. So we've got to recover both of those things.

The price increases that we have put out there in the first quarter for Winchester really just get us to recover those increased costs that we've seen. So unfortunately, I don't right now see that there's going to be a lot of improvement in the margin for Winchester, this is really going to be more about getting the costs pass through to hold the margins where they're at, which is not at a satisfactory level. So we -- sorry.

Candidly, we need more pricing to offset if copper stays at, I don't know, 6:10 this morning, there needs to be more, right.

There's got to be more coming, just to hold margins where they are. So even with that kind of green shoot that we're seeing around some improvement in commercial demand -- we have got to stay focused on getting prices up to get margins recovered. They're still significantly below where we expect them to be, and -- our commercial teams are extremely focused on doing that.

Our next question comes from Arun Viswanathan with RBC.

I hope you guys are well. I guess understanding that visibility is somewhat limited. Just wanted to understand kind of the earnings trajectory from here. So obviously, Q4 and Q1 were impacted by some onetime impacts. You guys have rolled out the more aggressive cost management actions, but you're still seeing some significant headwinds there that you just discussed in Winchester and Epoxy is still kind of a negative EBITDA territory.

So if I look at Q1, it looks like that's going to be in the $60 million range or so. And then, obviously, you'll have seasonal uplift in Q2 and Q3, but then Q4 will also be back down. So I struggle to kind of get above maybe 450 or so on the year. Am I kind of being a little bit too punitive there? Or what kind of onetime costs would you call out to kind of maybe increase from that base? Any kind of comments would be helpful.

Arun, Thank you for your question. So listen, I think there are obviously a lot of puts and takes. This is a very heavy year for us in terms of turnaround. This is probably the peak year that we've ever seen. We had a high year last year. We've had a higher year this year, and then we'll see some relief in 2027. So turnarounds are real headwind or a real headwind for us in 2026.

But as we go through the year, yes, you will see the seasonal improvement in Q2, Q3, especially around water treatment as those markets come back. That is going to happen -- we are going to see momentum around caustic pricing. We don't expect to see any improvement in vinyls. I mean I've already said that. I think that's just -- that's one where we've got to stay focused on being disciplined.

But I do want to go back to the cost comments and the question. We are not rolling out anything new or more aggressive on our cost reductions. What we are talking about in terms of our cost reductions, we were talking about at our Investor Day in 2024. We are delivering on what we had talked about back then. And what we see now is we actually have visibility -- we believe by 2028, we can exceed that $250 million of savings that we had talked about. So this isn't something new.

This is something that our organization is completely committed to. We have changed our performance metrics in terms of how we're rewarding our executives, our site leaders. So now our sites each have part of their part of their step, their short-term incentive is driven off of their specific performance around safety, reliability, cost performance and yields.

We are driving that discipline through the organization and that accountability and that ownership. And what I'd love to see is the organization is responding to that and delivering that. That's not something that's new. That's something that we've been talking about for the last year. And what you're seeing is the fruits of that are going to be borne out here in 2026.

Our next question comes from Vincent Andrews with Morgan Stanley.

My questions have been answered, so I'll pass it along.

Our next question comes from John Roberts with Mizuho.

Thank you. So Slide 16 shows that caustic soda prices declined sequentially in the December quarter. So I assume you ended the quarter lower you began. And I think Slide 15 says the price increases don't really start until the second quarter. So the March quarter caustic price will be down sequentially. I just wanted to confirm that because -- you were talking earlier about rock bottom inventories and tightness in the market, but it kind of doesn't seem to be consistent.

So listen, yes, we've got -- some of that is mix in terms of what you're seeing. We are seeing caustic pricing moving higher in the quarter. And that's in our system, and that's all that I can really comment on.

There is a lag that we see that you've got monthly pricing, you've got quarterly pricing and some pricing that's on a lag. And so you're going to start to see that really pick up in the second quarter compared to what you saw in the fourth quarter.

It was only down 3%?

Sorry, John, what was that?

The ECU PCI encompasses both price and power cost, right? So that's already in that 3% decline in the ECU PCI. So -- the difference between the 3% decline in the ECU PCI and the 60% decline in EBITDA was all volume and the Dow stranded costs?

No, that's more reflective of mix that you see in that PCI. So I mean that's -- frankly, that's noise more than anything.

So the ECU PCI doesn't encompass mix effect. It's a constant mix.

John, I think -- this is Todd. No, I think Ken said mix it is all chlorine derivatives, not just the ECU comment. It is all chlorine derivatives, including all the epoxy chlorine derivatives as well as all the chloralkali chlorine derivatives and as well as caustic soda. So it is all encompassing. And so you can see changes in mix. And as you heard, as in our commentary, we did have some more favorable mix in our Epoxy business.

This concludes our question-and-answer session. I would now like to turn the conference back over to Ken Lane for closing statements.

Thank you, Bailey, and thank you, everyone, for joining us today. We appreciate your interest in Olin, and we look forward to speaking to you at our first quarter 2026 earnings call. Thank you very much.

Thank you for attending today's presentation. You may now disconnect.

Good morning, and welcome to Olin Corporation's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, today's event is being recorded.

I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve.

Thank you, operator. Good morning, everyone. We appreciate you joining us today to review Olin's third quarter 2025 results.

Please keep in mind that today's discussion, together with the associated slides as well as the question-and-answer session that follows, will include statements regarding estimates or expectations of future performance. Please note, these are forward-looking statements and that Olin's actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described without limitations in the Risk Factors section of our most recent Form 10-K and in yesterday's third quarter earnings press release. A copy of today's transcript and slides will be available on our website in the Investors section under Past Events. Our earnings press release and related financial data and information are available under Press Releases.

With me this morning are Ken Lane, Olin's President and CEO; and Todd Slater, Olin's CFO. We'll start with some prepared remarks, then we'll look forward to taking your questions. In order to give everyone an opportunity, we will limit participants to one question with no follow-ups.

I'll now turn the call over to Olin's President and CEO, Ken Lane.

Thank you, Steve, and thanks to everyone for joining us today. Let's start with Slide 3 and our third quarter highlights. During the third quarter, we delivered robust results, reflecting strong performance in our Chlor Alkali products and Vinyls business, partially offset by ongoing weakness in our Epoxy and Winchester commercial ammunition businesses. We remain disciplined in our value-first commercial approach and operated our assets safely, reliably and efficiently.

Team Olin is more committed than ever to executing our value-first commercial strategy, maximizing cash generation and delivering on our capital allocation priorities while preserving our strong leverage to a demand recovery. During the third quarter, we continued to generate positive operating cash flow, and with a focused effort by Team Olin, achieved a significant milestone by securing our eligibility for Section 45V clean hydrogen production tax credits, which Todd will discuss shortly.

Now let's turn to Slide 4 and review our Chlor Alkali products and Vinyls results. Third quarter ECU values remained stable, as did global caustic soda demand. The main end markets for caustic soda have held up well. Some weakness in pulp and paper has been largely offset by good demand in other markets such as alumina and water treatment. As expected, caustic soda remains the stronger side of the ECU.

Adding to the good results for CATV was improved operating performance and lower costs. We are beginning to realize the benefits of our Optimize the Core strategy. During the quarter, we announced the dissolution of our Blue Water Alliance joint venture with Mitsui at year-end. Mitsui has been a long-term partner for Olin, and that will continue to be the case. However, we believe the complexity of a joint venture is not needed for us to strategically manage our participation in the EDC market. Aligned with our value-first commercial strategy, we will reduce our spot EDC exposure and focus on longer-term structural relationships, offering higher returns across the cycle.

Looking forward to the fourth quarter, we expect seasonally lower demand, and our Chlor Alkali team is focused on preserving ECU values. In support of that, we are taking aggressive steps to adjust our operating [ rates ], which will also help us deliver on our target to reduce working capital.

Now let's turn to Slide 5 for a look at our Epoxy results. Global Epoxy resin demand remains weak, and we continue to face significant headwinds in both Europe and the U.S. regions, facing subsidized imported resin from Asian producers. U.S. demand has been more resilient than Europe. And with the removal of Epoxy resins from [ Annex 2 ] tariff exemptions, we are seeing traction with U.S. price increases.

In spite of these market dynamics, Olin's third quarter formulated solutions volume improved sequentially. Fourth quarter planned maintenance presents a $14 million sequential headwind to Epoxy earnings. As we execute this turnaround safely and efficiently, the Epoxy team will focus on cash management as they reduce year-end inventories.

Olin's new Stade, Germany supply agreement will provide improved economics for our European production, similar to the benefits from our integrated operations at Freeport. Starting in January 2026, the new agreement is expected to provide an annual adjusted EBITDA benefit of approximately $40 million. With rationalization of capacity in Europe, we are seeing opportunities to grow our participation, and we'll do so with a value that is attractive.

Next, we move to Slide 6 for an update on our Winchester business. As we discussed last quarter, our commercial ammunition business has been hit by a perfect storm: Rising costs, elevated channel inventories, lower out-the-door retail sales and falling market prices. We estimate that high retail inventories have decreased Winchester commercial sales by approximately 5% to 10% so far this year.

In the face of weak consumer sales, retail inventories have been slow to correct. As a result of this market environment, commercial margins have dropped dramatically, with half being attributable to lower volume, while the other half is a combination of lower pricing and higher costs. We are seeing some positive pricing trends developing for the fourth quarter. Given the recent run-up in metals and manufacturing costs, commercial margins will not be restored until demand recovers and inventory levels have been rightsized.

In contrast to weak commercial demand, Winchester's military business continues to show strength. Domestic military and international military demand continues to grow as NATO countries expand their defense budgets. Our Next Generation Squad Weapon ammunition facility project at Lake City is well underway, and we are on course to complete construction in late 2027.

In parallel, we are developing and delivering components and equipment to support the Army's [ Accelerated Fielding ] plan. Recognizing that the commercial market is not improving as quickly as we had hoped, we are adjusting our operating model to make to order versus make to inventory. As a result, we will see a reduction in Winchester working capital that will be sustained until we see demand improve. As part of this change, we will extend our typical holiday plant shutdowns to further reduce supply and reduce inventory. This will shift Winchester closer to a just-in-time manufacturing model.

I'll now turn the call over to Todd Slater for a look at our financial highlights.

Thanks, Ken. Let's review our sequential quarterly adjusted EBITDA acreage. Third quarter 2025 adjusted EBITDA included a $32 million pretax benefit primarily related to the clean hydrogen production tax credit under Section 45V as part of the Inflation Reduction Act of 2022. Excluding the Section 45V tax credit, our third quarter adjusted EBITDA was $190 million, which was an 8% sequential improvement.

Chlor Alkali Products and Vinyls results improved, driven by lower operating costs and higher ethylene dichloride volumes while preserving ECU values as we navigate through this prolonged trough. Our Epoxy business continued to grow its formulated solutions volume as persistent headwinds from subsidized Asian imports impacted both the United States and European markets. As expected, Epoxy's third quarter results included higher operating costs from unabsorbed fixed manufacturing expenses incurred from planned inventory reductions.

Winchester's third quarter segment results reflected the continued weakness of commercial ammunition volumes and margins, which more than offset improved military and military project earnings. The typical third quarter seasonal growth in commercial demand was muted.

Now turning back to the 45V tax credit. We recognize this benefit as a result of our team's dedicated efforts over the last 3 years. During the third quarter, we received notification from the Department of Energy regarding our provisional carbon dioxide emissions rate, marking a significant milestone for tax credit recognition. The Section 45V tax credit pertains to qualified clean hydrogen produced and either sold or used at certain of our chlor alkali plants. Looking forward, we expect an annual benefit in adjusted EBITDA of $15 million to $20 million for the years 2026 through 2028, with lower amounts through 2032.

Next, let's move to Slide 8 for a review of our liquidity. During the third quarter, we fell short of our cash flow and working capital targets, resulting in an increase in net debt for the period. This was primarily due to unforeseen payment delays from the U.S. government related to Lake City military business. These payments were subsequently received in October. For 2025, we continue to expect working capital to be a source of at least $100 million of cash, excluding the timing of tax payments. Consistent with what we previously discussed, by year-end 2025, we expect net debt to be flat with year-end 2024.

Finally, we remain committed to our disciplined capital allocation approach, and our priorities are clear. First and foremost, we retain our investment-grade balance sheet. Second, we fund sustaining capital spending to maintain the safe and reliable operation of our assets. And third, we are committed to maintaining our quarterly dividend. And then fourth, any available free cash flow is returned to shareholders through either highly accretive growth opportunities or share buybacks.

Our teams continue to focus on cash generation, maintaining cost discipline and supporting our Beyond250 cost savings initiative. Our strong financial foundation enables Olin to continue executing our value-first commercial approach while adhering to our capital allocation priorities and prudent capital structure with a strong balance sheet and cash flow.

Ken, I'll now hand the call back to you.

Thanks, Todd. Let's finish up with Slide 9 and our outlook for the fourth quarter. In our CATV business, through actions we're taking, we expect to see stable ECU values in the face of seasonally weaker demand. Our Epoxy business remains challenged, but we'll begin to see improvement as we enter the new year and benefits accrue from our new Stade supply agreement, some pricing improvements in the U.S. market and volume gains in Europe following capacity rationalizations.

In Winchester, we have a very strong legacy and an industry-leading brand that has supported the U.S. and allied militaries for more than 150 years. We will see resilience in this business and are taking actions to accelerate that in the fourth quarter by adjusting our operating model, driving price increases and finding new opportunities in our international military business.

The current trough has been a test of our commercial model and our commitment to operating discipline. We've stayed the course and developed ways to further help ourselves through improvements in our cost structure that are beginning to show benefits. We will provide a more detailed progress report during our fourth quarter earnings call in early 2026.

But as we shared during our Investor Day, our Beyond250 initiative is built upon 3 pillars: First, the structural rightsizing and cleanup of our production assets. Recent rationalizations have left behind inefficiencies or remnant costs. This will be implemented in close coordination with our planned outages in the coming years. Second, we must streamline our operations and maintenance practices to work more efficiently and reduce our dependency on contractors. Third, we will redouble our efforts to be the industry leader in operating efficiency. These Beyond250 pillars are embedded in every employee's incentive so that we create a culture of ownership and performance-driven accountability that is aligned to our values, including being the safest and most reliable operator in the industry.

Finally, during the fourth quarter, we will realize a $40 million EBITDA penalty to reduce inventories and support our value-first commercial strategy. Including this, we expect our fourth quarter 2025 adjusted EBITDA to be in the range of $110 million to $130 million.

Operator, we are now ready to take questions.

[Operator Instructions] And today's first question comes from Hassan Ahmed with Alembic Global.

A question around -- I know it's early days to start thinking about 2026. But I mean, if I sit there and take a look at what your guidance implies for 2025, excluding sort of the inventory penalty, you get to around $734 million to $754 million in EBITDA, and that's obviously ex the inventory penalty. So I'm just trying to figure out via self help, via stuff that's in your control, how much of an increment could we see in 2026? Obviously, you guys have the Dow contract in place. There won't be the turnaround in the Epoxy business. And obviously, you guys have the whole cost-cutting side of things as well.

Hassan, this is Ken. Listen, I'll start, and then maybe Todd can add a little bit. As we look at what we're doing going into the fourth quarter, we've talked a lot about things that we have to do to help ourselves just because we're not seeing the market environment improve really in any of our businesses so far. So the focus on Beyond250 and the cost reductions that we're going to realize there is something that the entire organization is really driving to make sure that we can deliver that. So we've talked about a $70 million to $90 million run rate coming out of this year into next year. And that does include the Dow agreement at Stade, the new agreement that we've got that -- we're going to be seeing that in the P&L in the first quarter. It actually took effect on October 1.

But with all of that, we do see some upside to the $70 million to $90 million in 2026. So we're going to be giving you a little bit more color around that in the fourth quarter earnings call at the beginning of the year next year. So stay tuned for that, and we'll give you a little bit more details. But at the end of the day, we've really got to buckle down here and do what we can do to help ourselves. Todd, do you want to add anything to that?

Hassan, as we look into 2027, you mentioned turnarounds. I'll remind everyone on the call that we do have our 1 in every 3-year major turnaround on our VCM, vinyl chloride monomer unit, that will happen generally in the first half of next year. So that's probably a headwind relative to what we've seen this year.

Thank you. Our next question today comes from Josh Spector at UBS.

I apologize if I missed this earlier, but I just wanted to ask on the 45V credit. I mean, the $32 million in the quarter, how much of that is catch-up for earlier in the year? And really, the question is, what's the ongoing benefit we should be modeling in for Olin into next year or further out?

Yes. Josh, it's Todd. Thanks for the question. Yes, it is ultimately a catch-up. The $32 million, we were finally able to realize that because of getting our final CO2 emissions information from the Department of Energy. We've been working on this candidly for the last 3 years.

As we go forward, we would look at 2026 through 2028, we think you'll see adjusted EBITDA benefit in the $15 million to $20 million range, each of those years.

And our next question today comes from Matt DeYoe with Bank of America.

This is Salvator Tiano filling in for Matt. Can you talk a little bit about the working capital situation in Q3? I think there was a very big increase in some of the working capital buckets. Why this happened then, given that -- is it safe to assume that Q3 operating rates, especially in Chlor Alkali, were better than you expected in the initial guidance? And ultimately, what does this mean for your Q4 operating rates versus your -- how you've been running in the past few years? .

So listen, let's talk a little bit more detail about this inventory reduction. We're going to take a $40 million penalty in EBITDA in the fourth quarter. What that's going to do is going to free up about $150 million in cash. And that benefit that we're going to see in cash is something that really was built up over the full year. So we've seen increases in working capital in all the businesses. Some of it was back at the beginning of the year when we were expecting demand to be stronger, particularly when you think about Winchester. And we just didn't see the inventory is coming down as fast and now we're going to have to take some aggressive action to reduce that.

In chemicals, it's a combination of timing around turnarounds and needing to build some inventory during the third quarter in order to be ready for turnarounds in the fourth quarter. So you're going to see that come back out in the fourth quarter. But frankly, some of it is just us continuing to show discipline and supporting our commercial first -- or our value-first commercial strategy and being sure that we continue to be disciplined with that. So Todd, I don't know if there's anything you want to add related to that?

The only comment I would remind everyone -- and thanks for the question, Sal -- was that we did have penalty on working capital at the end of September related to delayed payments from the U.S. government for our Lake City military business. Ultimately, those have been received here in October. But that was candidly the biggest driver by far on why working capital moved up in the third quarter compared to the second.

Thank you. And our next question today comes from Frank Mitsch with Fermium Research.

I'd like to flesh out this $40 million negative impact due to inventories in the fourth quarter. It looks like it's a combination of Chlor Alkali and Winchester. So wondering if you could size it to -- is this more of an Olin issue? Or do you feel like the industry overall is holding much too much inventory, so we should expect lower operating rates from the industry overall? And how confident are you that the $40 million is the right number? And then as we start Q2 '26, you can go back to operating as you normally would?

Frank, thank you for the question. So listen, just to add a little bit more color maybe to that EBITDA penalty that we're facing. Like I said, a lot of the working capital build was related to Winchester. And so that's a totally different animal than when you talk about the chemicals value chains and whether the industry there has got too much inventory in the chain.

So let me talk about Winchester first. We've been talking about high inventories in the retail chain since this time last year. Those levels of inventory came down at the beginning of the year, but they have not continued to fall. They've sort of leveled off at a relatively high level. And if you couple that with the fact that there was sort of a wave of imports that came in prior to the tariffs of ammunition, that also added to that issue.

So Winchester is a bit unique. There is a lot of inventory in the chain there that needs to come out. And what we're going to do is we're not going to continue to use our balance sheet to carry that inventory if that inventory is somewhere else in the chain. That's just what we have to do to be disciplined and support our balance sheet.

Now for chemicals, it's really hard to have visibility. What I would say right now is I'm not concerned about too much inventory in the chain in the chemicals value chain. That's not something that we've seen. But what I would say is there's always a risk when you get into the fourth quarter because that's seasonally, the weakest quarter. There's always a chance that people do start to pull inventory even if they have low inventories. I can take the inventories really very low, very quickly.

And so we want to be prepared for anything here. We want to make sure that we rightsize our inventory levels, really reduce them to the minimum level. At the same time, we are going to reduce operating rates and show the discipline around being able to move the volume and the value that we like. And that strategy is not changing.

Thank you. And our next question today comes from Aleksey Yefremov with KeyBanc.

You mentioned opportunities to sign ABC supply agreements. Do you have anything in place today? Or is your entire [ industry ] volume on a spot basis? And also, are there any agreements that are fairly close to getting over the finish line soon in this area?

Aleksey, so listen, we -- obviously, we are working on more structural term agreements, term contracts for EDC. If you look at the EDC values today, 1 of the biggest variances we've got versus prior year is the EDC price that we see in the market today. Now fortunately, we're the cost leader in producing EDC, so we're able to weather that better than others.

But when we think about this across the cycle, it does make more sense for us to have more contracted positions than what we have today. We do have contracted business today. A lot of that runs through our joint venture with BWA. We announced that we're going to be unwinding that between now and the end of the year. Mitsui has been a great partner, but the complexity of running that business through a joint venture versus the value that we were realizing and the option for us to control that channel to market exclusively to ourselves, the trade-offs just were not in our favor. So that was really what drove our decision to unwind that joint venture so that we can go out and make these structural deals.

We'll still be working with Mitsui as a counterparty. That's not going to change. But we are looking at bigger opportunities to be able to place volume, and we should be able to have more to be able to say about that in the coming weeks. But yes, we are shifting the portfolio, but we will still have an exposure to the spot market. It's not going to go to 0, but it will be less than what we've had in the past.

Thank you. And our next question today comes from John Roberts of Mizuho.

Could you give us an update on the [ Radnor ] propellants contract bidding process? And also maybe an update on your hedging in metals and what you're expecting there?

John, yes, I'll give you a quick update there. Like anything with the government, it's a slow process, and with the government being shut down, it's basically not a running process right now. It's a little bit frustrating when you're dealing with the government here, especially when not paying us sometimes.

But we're going to continue to look at that as an opportunity. All it is, is a working capital investment for us. It doesn't require any real capital to speak of. They've issued a preliminary RFP. They've received comments from industry, and now, they're going back and they're revising that. So there'll be another draft RFP that's coming out in the not-too-distant future. Let's see what happens with the government shutdown. And then there'll be another iteration. So I don't expect there's going to be anything decided regarding this until late next year at the earliest, which means there probably won't be any transition to a new operator, assuming that's the choice that they make, until sometime in 2027. And I can't predict when that's going to be.

But it certainly is an opportunity that we're still very interested in. As I said in my prepared comments, Winchester has been a strong supporter of the U.S. and NATO allied militaries over many years. We believe that with our chemical-based core businesses, along with the advantages that we have with our Winchester brand, we're the best person to be able to operate that. But we're going to do it for a value that makes sense for Olin and Olin's shareholders. Now I'll let Todd talk about the metal hedging.

Thanks, Ken. As everyone, I believe, on the call knows, we are a hedger. And we would expect metal costs to be a headwind [ rough ] in 2026 relative to 2025. We do operate at least a rolling 4-quarter hedging program. And I happened to look this morning at copper and it was, I don't know, [ 510 ]? So as you know, those prices eventually seed into our systems slowly, but do, and so -- and copper has been up. So as we think about raw material costs, raw material costs will be a headwind, have been a headwind, and we expect that headwind to continue.

And our next question comes from Patrick Cunningham at Citi.

Maybe just on Epoxy. Obviously, still continues to be challenged by some price competitive Asian imports. Maybe you're getting a little protection here that gives you a platform for price. But how should we think about earnings levels into next year? You have some nice savings actions at Stade. You have maybe some incremental volume opportunities with competitors leaving the space in Europe. So just how are you thinking about the framework for next year on policy?

Patrick, thank you for your question. I hate to get too far out over my skis here, but I'm probably more optimistic on Epoxy than I have been in the last 1.5 years. But that's not because the market is improving. It's really because of the actions that we've taken at Olin over the last few years to be able to rightsize our cost base, rightsize our capacities. We do have a very good integrated business that has allowed us to survive when others can't. And so that's what happens in the trough. You start to see people that are not as competitive, close capacity, until demand begins to recover, and we're positioned very well as that happens.

But in the meantime, with all the cost reductions that we're going to realize, both in Europe and frankly, in the U.S., along with a little bit of a tailwind around tariffs, I do expect that going into next year, we're going to see a pretty significant improvement from a very low level for Epoxy, but I think that's a business where, yes, I'm going to be very eager to see that improvement next year, which should be quite positive versus this year, and as a percentage, will probably be better than any other business we've got.

Thank you. And our next question today comes from David Begleiter with Deutsche Bank.

Ken, on Slide 14, your ECU profit index was down in Q3 versus Q2. But your Chlor Alkali EBITDA was actually up in Q3 versus Q2, even after the onetime benefit. So why was that?

So listen, that index, obviously, has got a lot of moving parts to it. A big issue with that is mix, and we've seen that in other quarters. And what I'll tell you is it's all just related to mix in the portfolio. So you've seen it sort of going up and down quarter-to-quarter. But it is not something that I expect to see any further deterioration. Like I said, we expect ECU values to continue to be stable into Q4. Nothing that I see is changing that. But depending on which customers are operating plants or taking volume, that number is going to move around. But it is not something right now that is indicating any trend, one way or the other. Stability is the way that I would be thinking about that.

Thank you. And our next question comes from Pete Osterland with Truist Securities.

Within Winchester, could you talk a bit more about your plans to shift production towards the international defense markets? Is this intended to be a permanent change in strategy, just given the stronger growth opportunities that you're seeing within defense? And where do you see the revenue mix between commercial and defense going for this business over the medium term?

Pete, thank you for the question. Yes. This is -- if you go back to our Investor Day, we were very intentional talking about growing our defense business, and we have seen very positive developments in that market, especially around the NATO countries increasing the amount of spending that they're going to be -- or the investments that they're going to make in the coming years for their own defense, there's an opportunity for us to participate in that.

Now there's two things. There's a short term where we're getting a lot of inbound and the backlog for international military is growing quite substantially. And we are actively working with our partners to be able to secure that demand in the orders for the coming year. So we're going to continue to see robust growth in the short term. But we're also thinking more strategically about how do we participate in this in the longer term. And there are ways that we can do that, whether it's through partnerships or long-term supply deals, we're going to be looking at that. We do see that as a strategic opportunity for us.

We also talked about earlier in this year that the fact that military was going to become a larger part of our portfolio in terms of revenue. That's also driven largely by the project that we've got running at Lake City. So there's a lot of project revenue that's showing up there that's skewing -- it's skewing the sales number for Winchester towards military. It's got a relatively low margin because it's a project-based fee that we're basically earning for executing that project.

Now having said that, I do think that it's going to be a while before we see commercial demand come back. I think we're just continuing to see that consumers and consumer spending is still challenged around discretionary items, such as ammunition. But we will see this growth in international military. So that's going to keep our military portfolio stronger in the portfolio than what we maybe had thought a year ago. Good news is, international military margins are attractive. So we're really excited about that.

As you think about revenue, you're probably sitting today, 62% military. And the remainder of commercial, that is higher than it has been over the last several years. Candidly, I would expect that to tick up a little bit as we move forward with this shift toward more military sales, both internationally as well as project.

And our next question today comes from Mike Sison with Wells Fargo.

When you think about what needs to happen for a recovery in chemicals, are you seeing anything that might give you some confidence that there could be a recovery in '26? And then I know you don't talk about operating rates anymore, but how much volume is in the system that could recover? And maybe help us understand the earnings power of that volume now versus the past?

So listen, the fact of the matter is that, like I had said earlier, we are going to continue to adjust our operating rates to meet the demand that we see and manage our working capital in the chemical space accordingly. We are not going to carry inventory in this environment other than for things like turnaround. So all that I'll tell you is that our operating rates are differentially lower than the rest of the industry. And that shouldn't surprise anybody. That's our operating model, and we're going to continue to execute on that.

So in terms of what is it going to take to see a recovery, you can focus in first on North America, and you can look at housing. Obviously, housing is a big driver for chemicals, especially a lot of the chemistry that chlorine goes into. And once we see housing starts to really recover, it's anybody's guess when that may occur. I hope it's next year. But right now, I just don't see any signs that really there's a big turnaround in the housing market on the horizon. That's sort of North America. I think that's what's going to drive the market here in North America.

But when you think beyond our shores and you go to Europe or into Asia, you've got to see both of those markets begin to grow as well. And we haven't seen any signs yet of consumption really taking off in -- particularly in China, the largest market to be able to absorb a lot of this new capacity that they've been bringing on. So they are a big exporter now of PVC, which makes them a bigger exporter of things like caustic. And all of that is going to need to find a home with demand growth. So we need to see the global economy growing as well to be able to help absorb a lot of that additional supply that's coming on in China.

I know we've talked about a lot about anti [ evolution ] and all of those things. Those are great theories, and they're great policies that I hope we see the Chinese government begin to execute on. But so far, it's been not as much directed to chemicals as we had hoped that it would be. Maybe that changes in the new year. But right now, we need to see higher demand in Asia and some more rationalization there as well.

And our next question comes from Kevin McCarthy of Vertical Research Partners.

Ken, I was wondering if you could provide an update on your thoughts about the U.S. caustic soda market? On Slide 9, it appears as though you're baking in some price improvement for caustic in the fourth quarter. Maybe you could speak to how much of that is seasonal uplift as chlorine operating rates or demand presumably comes down seasonally versus -- any cyclical or structural uplift that you may see unfolding in caustic?

Kevin, thank you for the question. Yes. So we are expecting to see higher values for caustic in the fourth quarter. As I said in the prepared remarks, the caustic market is relatively stable. So we have seen some softening around pulp and paper. But we continue to see a robust market around alumina. And if you look at the aluminum market, prices for aluminum still are holding up quite well, which indicates healthy demand, and that's a very positive thing for caustic.

So the demand side, I would say, stability is the keyword. On the supply side, yes, you're going to see less supply in the fourth quarter. Some of that is going to be related to some of the things, some of the actions that we're taking with our portfolio. Some of it is also related to other industry outages that normally happen in the fourth quarter, that's going to be the case here as well. So between lower demand for chlorine derivatives, which is naturally going to pull down operating rates, and the normal sort of seasonal turnarounds that occur in the fourth quarter, that's going to restrict supply, and that should give support for caustic values in the fourth quarter.

And our next question today comes from Jeff Zekauskas with JPMorgan.

You talked about a large turnaround in VCM. I think this year, your forecasted turnaround costs are $125 million. Is maybe something like $175 million next year, up $50 million, a reasonable first draft?

Good morning, Jeff. So listen, turnarounds this year was pretty heavy. We are going to be updating our modeling data for 2026 at our fourth quarter earnings call here coming up at the beginning of the year. But that is a very large turnaround for us. It happens every 3 years, like Todd had mentioned. But there are other puts and takes as well. We're currently finalizing our schedule for turnarounds in 2026. So I don't have a final number to give you today. Some of that is still moving around. And once we do, like I said, we will get you a new outlook for 2026 at the beginning of the year.

And our next question today comes from Vincent Andrews at Morgan Stanley.

Wondering if you could just talk a little bit -- Todd, I know you went through your capital allocation priorities. But if we look at trailing 12-month leverage at the end of the year based on the fourth quarter EBITDA guidance, it pushes you close to 4. So does that change anything in terms of what you're going to be able to do? Are you going to continue to repurchase stock? Or are you going to hold off a little bit and see how 2026 develops? How should we be thinking about that in terms of your desire to maintain your investment-grade credit rating?

Yes. Thanks for the question. We would expect, as we've said, have a significant cash flow in the fourth quarter and be able to reduce debt back to even where we started the year. So net debt flat year-over-year. We do -- we have clearly curtailed the level of share repurchases this year compared to what we have done over the last several years. I think you saw us buy $10 million the last couple of quarters. So I wouldn't be surprised if we don't continue at a modest pace, but we are going to clearly prioritize that cash flow that we generated in the fourth quarter toward our reduction of debt from where we sit today.

And our next question today comes from Arun Viswanathan with RBC.

You guys are roughly at a $700 million annualized EBITDA run rate here. So -- and then we've seen kind of flattish chlor alkali index numbers. So what do you think it's going to take you to get to maybe $1 billion? Is that maybe roughly $50 million in Epoxy and Winchester uplift and then maybe $200 million or so in Chlor Alkali? And how does that -- maybe you can help us bridge that gap? That would be great.

Arun, thank you for the question. Listen, if you just think about where we are year-to-date, the biggest -- the biggest delta versus prior year was -- or is Winchester. So Chlor Alkali has held up quite well, and that's a really positive thing for us as a company. It's -- it's one of our -- it is, as Todd says, the engine that drives the bus. And so I'm very happy to see that.

So yes, you're going to see -- over time, you're going to see values improve off of trough levels. And with our operating rate leverage that we have, that's where you've got the biggest leverage right now in the portfolio overall. There will be a recovery in Winchester at some point. We've got to get through some of these cost headwinds. And we've got to get to a point where we see stronger consumer spending for discretionary items, improve. I'm not sure that we're going to see that in the short term. But the good news is we are, and the Winchester team is very focused on adjusting their operating model to the new environment that they're in.

We did not think we would be here a year ago. We thought we were going to see demand recovering in 2025, and we just have not seen that. We've seen it go the other way. And so we'll adjust that model, and I expect that we'll start to see some recovery there.

But again, I go back to what I said earlier on Epoxy. I'm probably more optimistic on Epoxy than any other business right now. Not because again, we're seeing lots of positive signals in demand in the market. That is still challenging. But with rationalization of capacity that's happening in the industry, some of the challenges that you see with higher glycerin costs in Asia, which is putting a floor under pricing, you get the tariff headwinds, you get the self-help that we've been implementing over the last several years we start to see some really positive momentum into next year for the Epoxy business.

So that's kind of how I think about where you're going to see the improvements going into 2026. And from there, I think things are going to move higher, but it just depends on what the rate of change is going to be, largely dependent on what's the global economy doing as well.

And our next question today comes from Matthew Blair at TPH.

Great. In light of the slower production outlook for Winchester, how are things going on the AMMO acquisition? And do you still expect to realize -- I think it was previous guidance was about $5 million EBITDA in the back half of the year from AMMO. Is that still realistic?

Thank you for the question, Matthew. Listen, we still feel very positive. We actually -- when we look at the business case around that acquisition and what we had talked about before, the synergies with the capability to build shelf cases at that facility has proven to be as good, if not even a little bit better than what we thought. So the synergies that we talked about, yes, very confident in delivering them not just for this year, but that $40 million level in 3 years' time, we feel very positive about that.

The asset is in great shape. The employees have really been great. Coming into Winchester, I think they're excited to be part of the Winchester brand, and that has been a very positive acquisition for us. So we feel really good about it.

And our next question today comes from Roger Spitz at Bank of America.

Todd, how should we see -- expect to see the clean hydrogen benefit in EBITDA? Will you start putting into EBITDA, maybe 25% each quarter? Or will you periodically be showing us a bigger [ marching ] year number in the EBITDA?

Yes. Thanks for the question, Roger. You should start now that we have received the real -- the key determining factor, which was our emissions information from the Department of Energy. You should start to see the 45V tax credit just be included as part of our normal earnings as a reduction to cost of goods sold every quarter. So it won't be called out like it is today. It will be -- this was really the catch-up for this year because we finally got the emissions data. So as you think about next year and the next 3 years of a $15 million to $20 million benefit, that will just run through as a reduction to cost of goods sold on a quarterly basis.

Thank you. As there are no further questions, this concludes our question-and-answer session. I'd now like to turn the conference back over to Ken Lane for closing comments.

Thank you, Rocco. And listen, thank you, everyone, for joining us this morning. We appreciate your interest in Olin, and we look forward to speaking with you at the beginning of the year next year. We wish you all a very safe and prosperous week. Thank you.

Thank you. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.