Executive Summary / Key Takeaways

• Olin Corporation is strategically repositioning itself to enhance shareholder value by optimizing its core chemical and ammunition businesses and pursuing high-return growth opportunities, even amidst a prolonged market trough.
• The company's "value-first" commercial approach, disciplined operating rates, and aggressive cost management, including the "Beyond250" initiative targeting over $250 million in savings by 2028, are foundational to its resilience.
• Recent financial performance in Q3 2025 showed strength in Chlor Alkali Products and Vinyls (CAPV), boosted by a $32 million clean hydrogen tax credit, while Epoxy and Winchester commercial segments faced significant headwinds.
• Strategic initiatives like the AMMO, Inc. acquisition, the PVC tolling partnership, and the new Stade, Germany Epoxy supply agreement are expected to drive future EBITDA benefits and strengthen competitive positioning.
• Despite a challenging Q4 2025 outlook, including a $40 million inventory reduction penalty, Olin is committed to maintaining an investment-grade balance sheet, its quarterly dividend, and achieving flat net debt by year-end 2025, while leveraging its integrated assets and technological advantages for long-term recovery.

Olin's Enduring Foundation and Strategic Imperative

Olin Corporation, established in 1892, stands as a vertically integrated global leader in chemical manufacturing and a prominent U.S. ammunition producer. The company's operations are concentrated across three capital-intensive segments: Chlor Alkali Products and Vinyls (CAPV), Epoxy, and Winchester. Olin's overarching strategy, termed "value-first," prioritizes Electrochemical Unit (ECU) margins over sales volumes, aiming to maximize cash generation and deliver on capital allocation priorities while preserving its strong leverage to an eventual demand recovery. This approach is deeply rooted in its history of operational optimization and strategic adaptation to market dynamics.

The company has consistently streamlined its asset footprint through various restructuring efforts since 2019, including the closure of multiple facilities in Freeport, Texas, and reductions in epoxy resin capacity across global sites. These actions are part of a broader "optimize the core" strategy, culminating in the "Beyond250" initiative launched in Q2 2025. This program targets over $250 million in cost reductions by 2028, with an expected $70 million to $90 million run rate entering 2026, by structurally rightsizing assets, streamlining operations, and enhancing operating efficiencies.

Olin's technological differentiation provides a significant competitive moat. In its CAPV segment, Olin benefits from a cost advantage in North American ethylene and ethylene dichloride (EDC) production, positioning it as a low-cost producer capable of operating profitably even in trough conditions. This structural advantage insulates the company from market volatility more effectively than many competitors. Furthermore, Olin's integrated Epoxy operations, particularly in North America and Europe, offer customers reliability and security of supply, a critical differentiator as the last fully integrated epoxy producer in these regions. This integration provides mid to high double-digit millions in value annually. The company's strategic joint venture, Hidrogenii, LLC, with Plug Power, Inc. (PLUG), highlights its commitment to advancing hydrogen production and utilization. This partnership led to the commencement of operations at a 15-ton-per-day hydrogen liquefaction plant in St. Gabriel, Louisiana, in Q2 2025, and secured eligibility for Section 45V clean hydrogen production tax credits, which will provide an annual adjusted EBITDA benefit of $15 million to $20 million from 2026 through 2028.

The broader industry landscape is marked by global economic uncertainty, impacting demand across various sectors. The North American housing market, a significant driver for chlorine-based chemicals, remains sluggish, and global economic growth, particularly in China, is needed to absorb new chemical capacity. However, the rising demand for electricity from AI and data centers presents a potential long-term tailwind, increasing the need for chemical products in electronics and water treatment. Olin's strategic positioning, including its entry into the PVC market via a tolling partnership, aims to capitalize on these evolving trends by upgrading its EDC capacity and exploring capital-efficient long-term opportunities in vinyls.

In the competitive arena, Olin faces diversified chemical giants like Dow Inc. (DOW) and LyondellBasell Industries (LYB) in Chlor Alkali, and specialty chemical players such as Huntsman Corporation (HUN) and Westlake Corporation (WLK) in Epoxy and Vinyls. While DOW and LYB boast greater scale and broader portfolios, Olin's specialized focus and cost leadership in certain chemical processes, particularly in Chlor Alkali, allow it to maintain competitive pricing and stronger customer relationships in niche applications. For instance, Olin's efficient manufacturing processes in Chlor Alkali enable it to counter Westlake's cost efficiency strengths. In Epoxy, while Huntsman may lead in advanced formulations, Olin's integrated production offers superior supply reliability, a critical factor for customers. Olin's diversified revenue streams, including its Winchester segment, also provide a degree of stability that some pure-play chemical competitors lack. However, Olin remains exposed to commodity price fluctuations and faces challenges from subsidized Asian epoxy imports, which have limited the benefits of its anti-dumping initiatives.

Segment Performance and Strategic Adjustments

Olin's operations are concentrated across three capital-intensive segments: Chlor Alkali Products and Vinyls (CAPV), Epoxy, and Winchester. The following sections detail their individual performance and strategic adjustments.

Chlor Alkali Products and Vinyls (CAPV)

The CAPV segment demonstrated robust performance in the third quarter of 2025, with sales increasing by 6.01% to $924.00 million compared to $871.60 million in the prior year period. Segment income surged to $127.60 million from $45.30 million, benefiting significantly from a $32 million pretax benefit related to the Section 45V clean hydrogen tax credit. This improvement also reflected higher volumes and lower costs, partially offset by lower EDC pricing. Caustic soda remains the stronger side of the ECU, with stable global demand, offsetting some weakness in pulp and paper with strong demand in alumina and water treatment.

For the nine months ended September 30, 2025, CAPV sales rose 5.66% to $2,828.00 million, and segment income increased to $270.80 million from $221.20 million in 2024. This growth was driven by higher volumes and the 45V tax credit benefit, partially offset by lower EDC pricing and higher raw material costs. Olin is actively managing its EDC participation by dissolving the Blue Water Alliance joint venture with Mitsui (MITSY) by year-end 2025, aiming to reduce spot exposure and foster longer-term structural relationships. The company anticipates seasonally lower demand in Q4 2025 for chemicals, but remains focused on preserving ECU values through aggressive operating rate adjustments and working capital reductions.

Epoxy

The Epoxy segment continues to face significant headwinds, reporting a segment loss of $32.20 million in Q3 2025, an improvement from a $42.80 million loss in Q3 2024, on sales of $349.60 million, up 22.97% year-over-year. For the nine months, the segment loss widened to $84.30 million from $57.60 million, despite a 7.24% sales increase to $1,012.50 million. This performance reflects weak global demand, particularly in Europe and the U.S., due to subsidized Asian imports and soft demand from building and construction, automotive, and consumer electronics markets.

Despite these challenges, Olin's formulated solutions volume improved sequentially in Q3 2025. A new supply agreement at Stade, Germany, effective January 2026, is expected to provide an annual adjusted EBITDA benefit of approximately $40 million, significantly contributing to the "Beyond250" cost savings. Management expresses cautious optimism for Epoxy in 2026, anticipating "pretty significant improvement from a very low level" due to cost reductions, potential tariff benefits, and industry rationalization. However, a planned maintenance turnaround in Q4 2025 is expected to be a $14 million sequential headwind. Olin's position as the last fully integrated epoxy producer in North America and Europe provides a critical advantage in supply reliability, which is increasingly valued by customers.

Winchester

Winchester's segment income declined to $19.30 million in Q3 2025 from $53.40 million in Q3 2024, despite a slight sales increase of 1.57% to $439.60 million. For the nine months, segment income fell sharply to $67.10 million from $195.90 million, on sales of $1,275.20 million. The commercial ammunition business has been hit by a "perfect storm" of rising costs, elevated channel inventories, lower retail sales, and falling market prices, leading to a dramatic drop in commercial margins.

In contrast, the military business continues to show strength, driven by growing domestic and international demand as NATO countries increase defense budgets. The Next Generation Squad Weapon ammunition facility project at Lake City is progressing, with construction expected to finish in late 2027. Olin's acquisition of AMMO, Inc.'s small caliber ammunition manufacturing assets for $55.80 million in April 2025 is expected to generate $5 million in incremental EBITDA in 2025 and $40 million by year three, leveraging synergies in brass shellcase capabilities and specialized production. To address the weak commercial market, Winchester is shifting to a "make-to-order" operating model, including extended holiday plant shutdowns, to reduce working capital and inventory, with a $40 million EBITDA penalty expected in Q4 2025 for this reduction. The military segment now accounts for approximately 62% of Winchester's revenue, a proportion expected to increase.

Financial Health and Capital Allocation Discipline

Olin's consolidated net income for Q3 2025 was $42.80 million, up from $24.90 million in Q3 2024. For the nine months ended September 30, 2025, net income was $42.90 million, down from $97.90 million in the prior year, which included a $109.40 million impact from Hurricane Beryl. Excluding the 45V tax credit, Q3 2025 adjusted EBITDA was $190 million, an 8% sequential improvement. Gross margin as a percentage of sales increased to 11% in Q3 2025 from 8% in Q3 2024.

The company's liquidity is supported by cash and cash equivalents, operating cash flow, and access to its 2025 Revolving Credit Facility and 2024 Receivables Financing Agreement. Cash provided by operating activities decreased by $208.50 million for the nine months ended September 30, 2025, primarily due to a $264.90 million increase in working capital and lower operating results. This working capital build was exacerbated by unforeseen payment delays from the U.S. government for Lake City military business, which were subsequently received in October. Olin expects working capital to be a source of at least $100 million of cash for the full year 2025, excluding tax payments.

Olin proactively refinanced its debt in March 2025, issuing $600 million in 6.62% senior notes due 2033 and expanding its senior credit facility to $1850 million, extending its maturity to 2030. This pushed material debt repayments out to 2029, enhancing financial resilience. The total debt to total capitalization increased to 60% as of September 30, 2025, from 58% at year-end 2024. Despite this, Olin remains in compliance with all debt covenants and believes it has ample liquidity to meet its short-term and long-term obligations.

The company repurchased 1.70 million shares for $40.40 million in the nine months ended September 30, 2025, with $1958.90 million remaining under authorization. Olin's capital allocation priorities remain clear: maintain an investment-grade balance sheet, fund sustaining capital, preserve the quarterly dividend, and return excess free cash flow through accretive growth or share buybacks.

Risks and Headwinds

Olin faces several pertinent risks. Global economic uncertainty and cautious customer buying patterns continue to challenge demand across all segments, particularly impacting the seasonally weaker fourth quarter. The Epoxy business remains vulnerable to subsidized Asian competition, which has limited the effectiveness of anti-dumping initiatives. Winchester's commercial segment is grappling with a "perfect storm" of high inventories, weak consumer spending, and rising raw material costs (metals and propellants), which are expected to be a headwind into 2026. International trade and tariffs pose ongoing uncertainty, with potential retaliatory tariffs on caustic soda and EDC exports to South America that could significantly alter market economics. Environmental exposures and legal actions, including asbestos-related proceedings, represent ongoing financial liabilities, though management does not anticipate a material adverse effect on financial position or results of operations from current legal matters.

Outlook and Value Creation Path

Olin anticipates its fourth quarter 2025 operating results to be lower than Q3 2025, with adjusted EBITDA guided in the range of $110 million to $130 million. This includes a $40 million EBITDA penalty for inventory reduction, primarily in Winchester. For 2025, capital spending is projected between $200 million and $220 million, depreciation and amortization at approximately $525 million, and income tax is expected to be a benefit of $25 million to $35 million, with cash taxes paid around $175 million. The "Beyond250" initiative is expected to deliver $70 million to $90 million in cost savings run rate into 2026, including the $40 million annual adjusted EBITDA benefit from the new Stade supply agreement starting January 2026. While a major VCM turnaround is scheduled for H1 2026, presenting a headwind, Olin's strategic actions, including the AMMO, Inc. acquisition's projected $40 million EBITDA synergy by year three, are expected to drive future value.

Conclusion

Olin Corporation is demonstrating remarkable resilience and strategic foresight in a challenging global market. Its "value-first" commercial approach, coupled with aggressive cost management through the "Beyond250" initiative and disciplined capital allocation, forms the bedrock of its investment thesis. While the company navigates a prolonged trough, particularly in its Epoxy and Winchester commercial segments, its integrated chemical assets and technological advantages, such as cost leadership in Chlor Alkali and reliable supply in Epoxy, provide a robust foundation. Strategic moves like the PVC tolling partnership and the AMMO, Inc. (POWW) acquisition are poised to unlock significant future value and diversify growth avenues. Despite near-term headwinds, Olin's commitment to maintaining a strong balance sheet, consistent dividends, and a clear path to cost reductions and high-return growth opportunities positions it favorably for substantial leverage into an eventual market recovery. The company's proactive measures to optimize its core businesses and strategically expand into attractive adjacencies underscore its potential for long-term shareholder value creation, with technological leadership playing a crucial role in its competitive differentiation and future profitability.