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Olin Corp. Reports Operating Results (10-Q)

July 29, 2009 | About:

Olin Corp. (OLN) filed Quarterly Report for the period ended 2009-06-30.

Olin Corporation is a manufacturer concentrated in chemicals metals and ammunition. The chemicals segment is divided into divisions: Chlor-Alkali Chemicals and Microelectronic Materials. Chlor-alkali includes chlor-alkali products sodium hydrosulfite and high strength bleach products. Chemicals includes pool chemicals biocides hydrazine polyols propylene glycols and surfactants and fluids. Microelectronic Materials includes image-forming and electronic interconnect materials and services. The metals and ammunition segment produces copper alloy sheet strip rod wire and ammunition. Olin Corp. has a market cap of $1.01 billion; its shares were traded at around $12.98 with a P/E ratio of 5.2 and P/S ratio of 0.5. The dividend yield of Olin Corp. stocks is 6.2%. Olin Corp. had an annual average earning growth of 20.1% over the past 5 years.

Highlight of Business Operations:

Sales for the three months ended June 30, 2009 were $383.0 million compared to $428.3 million last year, a decrease of $45.3 million, or 11%. Chlor Alkali Products sales decreased $69.8 million, or 22%, due to decreased shipment volumes and slightly lower ECU prices. Winchester sales increased by $24.5 million, or 21%, from the three months ended June 30, 2008, primarily due to increased volumes.

Selling and administration expenses for the three months ended June 30, 2009 increased $0.5 million, or 1%, from the three months ended June 30, 2008, primarily due to a higher level of legal and legal-related settlement expenses of $2.9 million, which included recovery actions for environmental costs previously incurred and expensed, increased consulting fees of $1.4 million, and higher salary and benefit costs of $0.5 million, partially offset by decreased management incentive compensation expense of $2.6 million, primarily resulting from mark-to-market adjustments on stock-based compensation and lower unfavorable foreign currency impact of $1.6 million. Selling and administration expenses as a percentage of sales were 9% in 2009 and 8% in 2008.

Sales for the six months ended June 30, 2009 were $783.6 million compared to $827.4 million last year, a decrease of $43.8 million, or 5%. Chlor Alkali Products sales decreased $90.4 million, or 15%, due to decreased shipment volumes partially offset by higher ECU prices. Our ECU netbacks, excluding SunBelt, increased 15% compared to the same period in the prior year. Winchester sales increased by $46.6 million, or 21%, from the six months ended June 30, 2008, primarily due to increased volumes.

Selling and administration expenses for the six months ended June 30, 2009 increased $6.4 million, or 9%, from the six months ended June 30, 2008, primarily due to a higher provision for doubtful customer accounts receivable of $5.1 million, related to a deterioration in customer credit, a higher level of legal and legal-related settlement expenses of $3.5 million, which included recovery actions for environmental costs previously incurred and expensed, increased consulting fees of $2.1 million, and higher salary and benefit costs of $1.3 million, partially offset by decreased management incentive compensation expense of $4.5 million, primarily resulting from mark-to-market adjustments on stock-based compensation and decreased recruiting expense of $0.8 million. Selling and administration expenses as a percentage of sales were 10% in 2009 and 8% in 2008.

Chlor Alkali Products sales for the three months ended June 30, 2009 were $242.4 million compared to $312.2 million for the three months ended June 30, 2008, a decrease of $69.8 million, or 22%. The sales decrease was primarily due to lower chlorine and caustic soda volumes of 32%, and slightly lower ECU pricing, which decreased 1% from the three months ended June 30, 2008. Volumes for bleach increased 13% compared to the three months ended June 30, 2008. Our ECU netbacks, excluding SunBelt, were approximately $585 for the three months ended June 30, 2009 compared to approximately $590 for the three months ended June 30, 2008. Freight costs included in the ECU netback increased 9% for the three months ended June 30, 2009, compared to the three months ended June 30, 2008. Our operating rate for the three months ended June 30, 2009 was 70%, compared to our operating rate of 89% for the three months ended June 30, 2008. The lower operating rate for 2009 resulted from lower caustic soda and chlorine demand.

Chlor Alkali posted segment income of $47.6 million for the three months ended June 30, 2009 compared to $70.5 million for the same period in 2008, a decrease of $22.9 million, or 32%. Chlor Alkali segment income was lower primarily due to decreased volumes ($48.6 million) offset by improved bleach and other product margins ($9.5 million) and lower operating costs ($16.2 million), primarily electricity.

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