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Olin Corp. Reports Operating Results (10-K)

February 24, 2011 | About:
10qk

10qk

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Olin Corp. (OLN) filed Annual Report for the period ended 2010-12-31.

Olin Corp. has a market cap of $1.49 billion; its shares were traded at around $18.69 with a P/E ratio of 15.1 and P/S ratio of 0.9. The dividend yield of Olin Corp. stocks is 4.3%.Hedge Fund Gurus that owns OLN: Bruce Kovner of Caxton Associates, George Soros of Soros Fund Management LLC, Steven Cohen of SAC Capital Advisors. Mutual Fund and Other Gurus that owns OLN: John Buckingham of Al Frank Asset Management, Inc., Mario Gabelli of GAMCO Investors, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

As of June 30, 2010, the aggregate market value of registrant s common stock, par value $1 per share, held by non-affiliates of registrant was approximately $1,426,484,996 based on the closing sale price as reported on the New York Stock Exchange.

The chlor alkali industry is cyclical, both as a result of changes in demand for each of the co-products and as a result of the large increments in which new capacity is added and removed. Because chlorine and caustic soda are produced in a fixed ratio, the supply of one product can be constrained both by the physical capacity of the production facilities and/or by the ability to sell the co-product. Prices for both products respond rapidly to changes in supply and demand. Our ECU netbacks (defined as gross selling price less freight and discounts) averaged approximately $475, $520 and $635 per ECU in 2010, 2009 and 2008, respectively.

Our 2009 ECU netbacks of $520 were 18% lower than the 2008 netbacks of $635, reflecting the changes in the pricing dynamics in North America. Beginning late in the fourth quarter of 2008 and continuing through 2009, demand for caustic soda weakened significantly, and fell below the demand for chlorine. This created excess supply in North America, which caused caustic soda prices to fall. The over supply of caustic soda caused industry operating rates to be constrained, which resulted in chlorine price increase announcements of $300 per ton during the second quarter of 2009. Caustic soda prices declined precipitously in the second quarter of 2009 and these declines continued into the third quarter of 2009. During the third quarter of 2009, chlorine and caustic soda demand became more balanced eliminating the oversupply of caustic soda. We began realizing increases in chlorine prices in the third quarter of 2009 with most of the improvement in the fourth quarter of 2009. ECU netbacks, in our system, bottomed out in the third quarter of 2009. During the fourth quarter of 2009, as caustic soda demand improved, chlorine production declined due to seasonally weaker demand. This resulted in a supply and demand imbalance for caustic soda in North America. As a result of this imbalance, in December 2009, a $75 per ton caustic soda price increase was announced. We began realizing the benefits of this price increase in caustic soda in the first half of 2010.

Our 2010 ECU netbacks of $475 were 9% lower than the 2009 netbacks of $520; however, the pricing trend has been positive throughout 2010 as ECU netbacks increased sequentially from the low level of $375 in the third quarter of 2009. The fourth quarter of 2010 ECU netback was $515. As business conditions improved throughout 2010, our quarterly chlor alkali operating rates improved year-over-year by at least 10%, peaking in the third quarter of 2010 with a 91% operating rate during the summer demand season. A significant portion of the North American chlor alkali demand improvement came from exports of products made from chlorine, driven by the energy advantage North America enjoys by using natural gas as compared to crude oil. With demand for both chlorine and caustic soda improving, price increases were announced throughout the year. During February 2010, an $80 per ton caustic soda price increase was announced. We began realizing a portion of this price increase in caustic soda in the second quarter of 2010. Caustic soda demand continued to improve, and as a result, during the third quarter of 2010, three additional caustic soda price increases were announced totaling $135 per ton. We believe that a portion of the $135 per ton caustic soda price increases announced during the third quarter of 2010 will be realized. We anticipate some additional benefits from these price increases and from contracts that re-set on an annual basis to be realized in the first half of 2011. Additionally, we announced a $40 per ton caustic soda price increase in January 2011. While the success of this $40 per ton caustic soda price increase is not yet known, some portion of the benefits of this price increase, if realized, would impact our system beginning in the second quarter of 2011.

The total amount of contracted backlog was approximately $178.1 million and $231.2 million as of January 31, 2011 and 2010, respectively. The backlog orders are in our Winchester business. Backlog is comprised of all open customer orders not yet shipped. Approximately 66% of contracted backlog as of January 31, 2011 is expected to be filled during 2011.

Our research activities are conducted on a product-group basis at a number of facilities. Company-sponsored research expenditures were $2.1 million in 2010, $2.2 million in 2009 and $2.0 million in 2008.

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