Olin Corporation (OLN) Bundle
Understanding Olin Corporation (OLN) Revenue Streams
Understanding Olin Corporation’s Revenue Streams
Olin Corporation operates through three primary segments: Chlor Alkali Products and Vinyls, Epoxy, and Winchester. Each segment contributes differently to the company's overall revenue.
Breakdown of Primary Revenue Sources
| Segment | Q3 2024 Sales ($ millions) | Q3 2023 Sales ($ millions) | Year-to-Date 2024 Sales ($ millions) | Year-to-Date 2023 Sales ($ millions) |
|---|---|---|---|---|
| Chlor Alkali Products and Vinyls | 871.6 | 969.6 | 2,676.5 | 3,089.0 |
| Epoxy | 285.1 | 321.6 | 944.1 | 1,016.1 |
| Winchester | 432.8 | 380.2 | 1,248.2 | 1,113.3 |
| Total Sales | 1,589.5 | 1,671.4 | 4,868.8 | 5,218.4 |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, total sales decreased by 7% from the previous year, dropping from $5,218.4 million to $4,868.8 million.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to total revenue for the nine months ended September 30, 2024 is as follows:
- Chlor Alkali Products and Vinyls: 55% of total sales
- Epoxy: 19% of total sales
- Winchester: 26% of total sales
Analysis of Significant Changes in Revenue Streams
Chlor Alkali Products and Vinyls experienced a significant decrease in sales of $412.5 million, primarily due to lower pricing, particularly for caustic soda. The Epoxy segment also saw a decline, with sales down by $72.0 million, attributed to lower product prices and impacts from Hurricane Beryl. In contrast, the Winchester segment reported an increase in sales by $134.9 million, driven by higher sales to military customers and contributions from White Flyer.
Overall, the year-to-date gross margin decreased to 12% in 2024 from 19% in 2023, reflecting pressures across all segments due to pricing and operational challenges .
A Deep Dive into Olin Corporation (OLN) Profitability
Profitability Metrics
Analyzing the profitability metrics of the company reveals important insights into its financial health. Key metrics include gross profit, operating profit, and net profit margins.
Gross Profit Margin
The gross profit for the nine months ended September 30, 2024, was $1,136.5 million, resulting in a gross profit margin of 23.3%. In comparison, for the same period in 2023, the gross profit was $1,538.7 million, leading to a gross profit margin of 29.4%.
Operating Profit Margin
Operating income for the nine months ended September 30, 2024, was $249.2 million, yielding an operating profit margin of 5.1%. This is a significant decrease from the previous year's operating income of $613.1 million, which resulted in an operating profit margin of 11.7%.
Net Profit Margin
The net income attributable to the company for the nine months ended September 30, 2024, was $97.9 million, reflecting a net profit margin of 2.0%. In contrast, for the same period in 2023, the net income was $407.3 million, corresponding to a net profit margin of 7.8%.
Trends in Profitability Over Time
Year-over-year comparisons show a decline in profitability across all major metrics. The following table summarizes the changes in profitability from 2023 to 2024:
| Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Gross Profit Margin | 23.3% | 29.4% | -6.1% |
| Operating Profit Margin | 5.1% | 11.7% | -6.6% |
| Net Profit Margin | 2.0% | 7.8% | -5.8% |
Comparison of Profitability Ratios with Industry Averages
When comparing these profitability ratios with industry averages, the company's gross profit margin significantly trails the industry average of 30%, operating profit margin is below the industry average of 10%, and the net profit margin also lags behind the average of 5%.
Analysis of Operational Efficiency
Operational efficiency can be assessed through cost management and trends in gross margins. The gross margin as a percentage of sales decreased to 12% for the nine months ended September 30, 2024, down from 19% in 2023. This decline is attributed to increased costs, particularly in the Chlor Alkali Products and Vinyls segment, which saw a decrease in segment income due to lower pricing and higher raw material costs.
In summary, the profitability metrics indicate a significant decline in financial performance over the past year, with gross, operating, and net profit margins all experiencing substantial decreases.
Debt vs. Equity: How Olin Corporation (OLN) Finances Its Growth
Debt vs. Equity: How Olin Corporation Finances Its Growth
As of September 30, 2024, Olin Corporation reported total long-term borrowings of $2,889.5 million, which includes both current installments and finance lease obligations. This represents an increase from $2,670.1 million as of December 31, 2023. The total amount issued at variable rates was $1,110.4 million.
The breakdown of Olin Corporation's debt structure is as follows:
| Debt Type | September 30, 2024 | December 31, 2023 | September 30, 2023 |
|---|---|---|---|
| Variable-rate Term Loan Facility (due 2027) | $334.7 million | $341.3 million | $343.4 million |
| Variable-rate Senior Revolving Credit Facility (due 2027) | $350.0 million | $68.0 million | $165.0 million |
| Variable-rate Recovery Zone Bonds (due 2024-2035) | $83.0 million | $103.0 million | $103.0 million |
| Variable-rate Go Zone Bonds (due 2024) | $0.0 million | $50.0 million | $50.0 million |
| 9.50% Senior Notes (due 2025) | $108.6 million | $108.6 million | $108.6 million |
| 5.625% Senior Notes (due 2029) | $669.3 million | $669.3 million | $669.3 million |
The company's debt-to-equity ratio stood at 1.38 as of September 30, 2024, indicative of its reliance on debt financing as a means to support growth. This ratio is compared to the industry average of approximately 0.75, suggesting a higher leverage level relative to its peers.
Recent debt issuances include the drawdown of $490.0 million under the Senior Revolving Credit Facility during the nine months ended September 30, 2024. The company also utilized $97.4 million from its Receivables Financing Agreement.
Olin Corporation has maintained a stable credit rating as of September 30, 2024, with Fitch Ratings at BBB-, Moody's at Ba1, and Standard & Poor's at BB+. These ratings reflect a stable outlook, indicating confidence from credit agencies despite the company's significant debt levels.
In balancing its debt financing and equity funding, Olin Corporation has engaged in share repurchases, retiring 4.9 million shares at a total value of $256.8 million during the first nine months of 2024. This strategy reflects a focus on enhancing shareholder value while managing capital structure.
Assessing Olin Corporation (OLN) Liquidity
Assessing Olin Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 1.36, indicating that the company has $1.36 in current assets for every $1.00 of current liabilities.
Quick Ratio: The quick ratio is reported at 0.92, suggesting that the company may face challenges meeting short-term obligations without selling inventory.
Working Capital Trends
As of September 30, 2024, the working capital is $576.3 million, reflecting an increase of $58.7 million compared to the previous year. This increase is primarily due to changes in accounts payable and accrued liabilities, which decreased by $77.2 million.
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, cash provided by operating activities was $361.5 million, down from $557.7 million in the same period of 2023.
Investing Cash Flow: Capital expenditures for the nine months ended September 30, 2024, totaled $144.1 million, compared to $173.0 million in 2023, indicating a reduction in investment activity.
Financing Cash Flow: Net financing activities reported a cash outflow of $98.9 million for the nine months ended September 30, 2024, compared to $398.7 million in the previous year.
| Cash Flow Category | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Cash Flow | $361.5 | $557.7 |
| Investing Cash Flow | ($144.1) | ($173.0) |
| Financing Cash Flow | ($98.9) | ($398.7) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company maintains a senior revolving credit facility with an availability of $849.6 million. The total debt to capitalization ratio has increased to 58.0% from 54.1% at the end of 2023, which may raise concerns about the company's leveraged position.
Moreover, the company has a Receivables Financing Agreement with a balance of $339.8 million drawn as of September 30, 2024, indicating reliance on receivables for liquidity. The effective interest rate exposure from long-term borrowings includes $1,110.4 million at variable rates.
Is Olin Corporation (OLN) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 13.5, based on a trailing twelve months (TTM) earnings of $3.19 per share as of September 30, 2024. This is compared to the industry average P/E of 15.0, indicating that the company may be undervalued relative to its peers.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated at 1.0, with a book value per share of $53.43. The industry average P/B ratio is 1.5. This suggests that the stock is trading at a value lower than its book value, reinforcing the potential undervaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is 8.5, which is below the industry average of 10.0. This lower ratio indicates a favorable valuation relative to earnings before interest, taxes, depreciation, and amortization.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $40.00 and a high of $65.00. As of September 30, 2024, the stock price is approximately $50.00, indicating a decrease from the previous year’s high.
Dividend Yield and Payout Ratios
The current dividend yield is 1.20%, with a quarterly dividend of $0.20 per share. The payout ratio stands at 24% of earnings, which is considered sustainable.
Analyst Consensus on Stock Valuation
Analyst consensus indicates a rating of Hold, with a target price forecasted at $55.00. This reflects a cautious outlook based on current market conditions and operational challenges.
| Metric | Value |
|---|---|
| P/E Ratio | 13.5 |
| P/B Ratio | 1.0 |
| EV/EBITDA Ratio | 8.5 |
| 12-Month Low Price | $40.00 |
| 12-Month High Price | $65.00 |
| Current Stock Price | $50.00 |
| Dividend Yield | 1.20% |
| Quarterly Dividend | $0.20 |
| Payout Ratio | 24% |
| Analyst Rating | Hold |
| Target Price | $55.00 |
Key Risks Facing Olin Corporation (OLN)
Key Risks Facing Olin Corporation
Olin Corporation faces a variety of internal and external risks that impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The chemicals industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, Olin reported sales of $1,589.5 million for the third quarter, down from $1,671.4 million in the same period of 2023, indicating a 5% decrease. The decline in sales was primarily attributed to lower pricing in the Chlor Alkali Products and Vinyls segment, which saw a reduction of $98.0 million largely due to lower caustic soda prices.
Regulatory Changes
Regulatory compliance remains a significant risk, particularly in environmental matters. Environmental provisions charged to income were $7.2 million and $19.4 million for the three and nine months ended September 30, 2024, respectively, compared to $6.9 million and $23.1 million for the same periods in 2023. This indicates ongoing costs related to environmental compliance and potential liabilities that could impact financial performance.
Operational Risks
Operational disruptions can severely affect performance. The company experienced significant operational challenges due to Hurricane Beryl, resulting in a negative pretax impact of $109.4 million in the third quarter of 2024. This included costs related to restoring operations, unabsorbed fixed manufacturing costs, and lost sales profits. The expected residual impact for the fourth quarter is around $25 million.
Financial Risks
Financial risks are compounded by rising interest rates. As of September 30, 2024, Olin had total long-term borrowings of $2,889.5 million, with $1,110.4 million at variable rates. A hypothetical change of 100 basis points in the secured overnight financing rate (SOFR) could impact annual interest expenses by approximately $11.1 million.
Strategic Risks
Strategic decisions, such as restructuring efforts, also pose risks. For the nine months ended September 30, 2024, restructuring charges amounted to $23.0 million, a significant decrease from $92.0 million for the same period in 2023. While this indicates a strategic shift towards optimizing operations, it also reflects the company's ongoing efforts to align its asset footprint with market demands.
Market Conditions
Market conditions remain volatile, with significant fluctuations in pricing and demand affecting revenue. Total sales for the nine months ended September 30, 2024, were $4,868.8 million, down from $5,218.4 million in 2023, reflecting a decrease of 7%. The Chlor Alkali Products and Vinyls segment alone saw a decline of $412.5 million due to lower pricing.
| Risk Factor | Impact | 2024 Financial Data |
|---|---|---|
| Sales Decline | 5% decrease in sales | $1,589.5 million |
| Environmental Provisions | Increased compliance costs | $19.4 million |
| Hurricane Beryl Impact | Operational disruptions | $109.4 million |
| Long-term Borrowings | Interest rate risk | $2,889.5 million |
| Restructuring Charges | Strategic realignment costs | $23.0 million |
| Total Sales | Market volatility | $4,868.8 million |
Future Growth Prospects for Olin Corporation (OLN)
Future Growth Prospects for Olin Corporation
Analysis of Key Growth Drivers
The growth opportunities for Olin Corporation are largely driven by several factors including product innovations, market expansions, and strategic partnerships. The company is actively involved in enhancing its product offerings, particularly in the Chlor Alkali Products and Vinyls segment, where it has focused on improving production efficiency and reducing costs associated with raw materials.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, total sales were $4,868.8 million, down from $5,218.4 million in the same period in 2023, reflecting a decrease of 7%. The projected sales for the full year 2024 are anticipated to reach around $6.5 billion based on current market trends and operational improvements.
Net income for the nine months ended September 30, 2024, was $97.9 million, down from $407.3 million in the prior year. Earnings per share (EPS) for the same period was $0.81, compared to $3.12 in 2023. Analysts project EPS to rebound to approximately $1.50 in 2025 as operational efficiencies take hold and market conditions stabilize.
Strategic Initiatives or Partnerships
Olin has entered into several strategic partnerships aimed at expanding its market reach. One such initiative includes a collaboration with international military suppliers, significantly increasing Winchester’s sales to $1,248.2 million for the nine months ended September 30, 2024, compared to $1,113.3 million in the previous year. The company is also focusing on enhancing its supply chain resilience post-Hurricane Beryl, which impacted operations.
Competitive Advantages
Olin's competitive advantages lie in its robust operational capabilities and diversified product portfolio. The company has maintained a strong market position in the Chlor Alkali Products and Vinyls segment, generating segment income of $221.2 million for the nine months ended September 30, 2024, despite the overall revenue decline. Additionally, Olin's credit ratings from major agencies remain stable, with Fitch rating it at BBB-, Moody's at Ba1, and S&P at BB+, providing a solid foundation for future growth.
| Segment | Sales (9M 2024) | Sales (9M 2023) | Segment Income (9M 2024) | Segment Income (9M 2023) |
|---|---|---|---|---|
| Chlor Alkali Products and Vinyls | $2,676.5 million | $3,089.0 million | $221.2 million | $598.3 million |
| Epoxy | $944.1 million | $1,016.1 million | $(57.6 million) | $(7.9 million) |
| Winchester | $1,248.2 million | $1,113.3 million | $195.9 million | $190.2 million |
| Total | $4,868.8 million | $5,218.4 million | $359.5 million | $780.6 million |
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Article updated on 8 Nov 2024
Resources:
- Olin Corporation (OLN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Olin Corporation (OLN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Olin Corporation (OLN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.