Peter Osterland

Pete Osterland asked about the $36 million tailwind from improved plant reliability in PEM during Q3, inquiring if a sequential tailwind is expected in Q4 and if a similar amount (around $35 million) is reasonable. He also sought details on the $200 million cost savings planned for 2026, specifically the expected cadence throughout the year and how much will be realized in 2026 EBITDA compared to 2025.

Answer

Steven Bender, EVP and CFO, confirmed expectations for continued improved reliability in Q4, noting that the dollar quantification depends on pricing assumptions. For the $200 million cost savings in 2026, he expects all of it to be realized, as actions are already underway across supply chain, feedstock, and structural costs. He mentioned that $115 million of the 2025 target ($150-$175 million) has already been achieved, with these efforts being additive into 2026.

Pete Osterland inquired about the $36 million tailwind from improved plant reliability in PEM during Q3, asking if a sequential tailwind is expected in Q4 and a reasonable amount to anticipate.

Answer

Steve Bender (EVP and CFO) confirmed expectations for continued improved reliability in Q4, which should result in a tailwind. However, he noted that the precise dollar quantification of this benefit would depend on the analyst's specific pricing assumptions for their model.

Peter Osterland from Truist Securities asked about the percentage of PEM segment volumes sold into export markets during Q2 compared to normal levels and the expected mix for Q3. He also requested an estimate for any cash outlays required to achieve the newly announced $200 million in incremental cost savings.

Answer

EVP & CFO Steven Bender indicated that normalized exports for PEM products are in the mid-30% range, but Q2 levels were lower due to production outages. He also stated that the new cost-saving actions are not expected to require a large cash outlay and that the benefits will be delivered largely in 2026.

Peter Osterland from Truist Securities asked for a breakdown of the $80 million in Q1 outage costs between planned and unplanned events and inquired about expected costs in Q2. He also questioned how much further Westlake could cut its 2025 capital expenditure budget if market conditions worsen.

Answer

M. Bender, EVP and CFO, clarified that planned turnarounds accounted for approximately two-thirds of the $80 million outage impact. He noted the affected units were ramping up in Q2. Regarding CapEx, he stated that while spending on safety and reliability would not be cut, the company would closely evaluate other activities and take further action if market conditions dictated.

Peter Osterland asked for the outlook for growth into Westlake's infrastructure end markets in 2025, relative to the overall guidance for the HIP segment.

Answer

EVP and CFO Steve Bender highlighted that the Pipe & Fittings business, a key part of the infrastructure stream, was a strong contributor in Q4 and is seen as a leading indicator for construction. He expects this business to continue moving forward positively. He also noted that the compounds business, serving wire, cable, auto, and health markets, continues to be a nice contributor with good demand signals.

Pete Osterland from Truist Securities asked if Micromax's assets were historically underinvested in and if Element Solutions Inc anticipates elevated capital spending to realize its full potential. He also inquired about expected one-time costs for standing up and integrating the business. Additionally, he asked about the potential for further margin expansion in the industrial solutions business, given its strong Q3 performance despite challenging operating conditions.

Answer

President and CEO Benjamin Gliklich clarified that Micromax, similar to Element Solutions Inc's businesses, is asset-light and people-intensive, expecting capital expenditure to be around 2% of sales, not requiring significant physical asset investment or an uptick in Element Solutions Inc's overall CapEx. He mentioned a few million dollars in standalone costs, which are included in the $40 million full-year contribution, with potential for synergies over 12-18 months. For the industrial business, Mr. Gliklich confirmed there is significant room for further margin expansion, driven by productivity, procurement, and improved absorption as volumes recover from prior peak levels. He noted that Element Solutions Inc's electronics metal margins were 28% in the quarter, only 100 basis points off their prior peak, with continued OpEx investment supporting future growth.

Pete Osterland asked if Micromax's assets were historically underinvested, if elevated capital spending would be needed to reach its full potential, and for expected one-time costs to stand up and integrate the business. He also questioned the industrial solutions business's margin potential, asking where margins could go in a more normalized demand environment and if significant expansion is possible from the nearly 24% reported in Q3.

Answer

President and CEO Benjamin Gliklich clarified that Micromax is an asset-light, people-intensive business, similar to ESI's, requiring about 2% of sales in capital, with existing capacity for substantial growth, thus no significant uptick in ESI's CapEx is expected. He mentioned a few million dollars in standalone costs, included in the $40 million contribution, with potential synergies over 12-18 months. For industrial margins, Mr. Gliklich confirmed significant room for expansion, noting the business is still far from prior peak volumes. He expects productivity, procurement, and better absorption with volume recovery, along with the positive mix from the offshore business, to drive further margin growth across Element Solutions Inc.

Peter Osterland of Truist Securities inquired about pricing dynamics and margin upside potential in the Industrial and Specialty segment, and also asked for a follow-up on the outlook for the Offshore business.

Answer

President and CEO Benjamin Gliklich explained that in the Industrial business, the company is maintaining price discipline while driving productivity, which is supporting earnings in a flat volume environment. He confirmed significant margin upside exists with any volume recovery. For the Offshore business, he clarified that while Q2 saw a catch-up from project delays, full-year growth is expected to be in the mid-single digits rather than the high teens seen in the quarter.

Peter Osterland of Truist Securities asked about pricing discipline in the Industrial segment and its potential for margin upside in a recovery, and also inquired about the second-half growth outlook for the Offshore business.

Answer

President & CEO Benjamin Gliklich stated that in the Industrial business, the company is maintaining price discipline and driving productivity, leading to earnings growth despite flat volumes. He noted that with any volume recovery, incremental margins should be above average. For the Offshore business, he clarified that the high-teens growth from Q2 is not expected to repeat, with mid-single-digit growth being a more realistic expectation for the full year.

Peter Osterland asked if there were any signs of tariff-related pre-buying in customer order patterns. He also inquired about the margin performance in the Industrial & Specialty (I&S) segment and whether margins could expand further as the offshore energy business recovers.

Answer

CEO Ben Gliklich stated there was no clear evidence of a pre-build in their supply chain, as growth is primarily from B2B projects with visible CapEx drivers. Regarding I&S margins, he confirmed that the expected second-half recovery of the high-margin offshore business should drive margin expansion. CFO Carey Dorman added that there is further upside potential from operating leverage if volumes in the core industrial business recover.

Peter Osterland of Truist Securities asked about the drivers for margin expansion in the upcoming year and sought more detail on the capital projects being prioritized with the elevated CapEx budget.

Answer

CEO Benjamin Gliklich expects continued margin expansion from favorable mix, some raw material deflation, and productivity, but not at the same pace as 2024. Regarding CapEx, Gliklich highlighted the Coperion project as a priority, along with other investments to support high-value niches. CFO Carey Dorman added that they are also increasing investment in customer equipment to secure long-term contracts.

Pete Osterland asked about Winchester's strategic shift towards international defense markets, inquiring if this is a permanent change given stronger growth opportunities, and the expected revenue mix between commercial and defense over the medium term.

Answer

President and CEO Ken Lane confirmed this is a strategic and permanent shift, aligning with Olin's Investor Day discussions to grow the defense business, particularly with increasing NATO country spending. He noted a substantially growing international military backlog and attractive margins. CFO Todd Slater added that military revenue currently represents about 62% of Winchester's total, a higher proportion than in recent years, and expects this to increase further.

Pete Osterland asked about Winchester's strategy to shift production towards international defense markets, whether this is a permanent change, and the expected revenue mix between commercial and defense in the medium term.

Answer

Ken Lane, President and CEO, confirmed the strategic intent to grow the defense business, driven by increased NATO spending and a growing international military backlog. Todd Slater, CFO, noted that military revenue currently accounts for 62% of Winchester's sales, a higher proportion than in recent years, and is expected to increase further with this strategic shift.

Pete Osterland of Truist Securities asked about the impact of competitive dynamics in the European epoxy market, including a competitor's capacity shutdown and the finalization of EU anti-dumping duties.

Answer

President and CEO Ken Lane expressed strong disappointment with the EU Commission's decision not to impose duties on South Korea, calling it a missed opportunity to protect a vital industry. He emphasized that as the last fully integrated epoxy supplier in Europe, Olin will adjust its commercial model to capture the value and volume it is entitled to from customers who require supply reliability, which will be a key part of its strategy.

Peter Osterland from Truist Securities, Inc. inquired about the increased 2025 cost-cutting target, asking if it represents a pull-forward of the 2028 goal or is incremental, and which segments would see the extra savings.

Answer

President and CEO Kenneth Lane explained that the increased savings target is a combination of accelerating some planned structural cost reductions and finding new in-year productivity opportunities. He emphasized that the team is focused across all sites and functions on finding efficiencies and reducing costs, indicating the savings are broad-based.

Peter Osterland inquired about the M&A pipeline for the Winchester segment and how management weighs bolt-on acquisitions against share repurchases.

Answer

CEO Kenneth Lane stated that Olin focuses on highly accretive, high-return bolt-on deals, like the AMMO, Inc. acquisition at a sub-2x multiple. He emphasized that any potential deal faces a high hurdle, as it must offer a better return than buying back Olin's own stock, which he described as a 'very good value' at current levels.

Peter Osterland of Truist Securities asked about the Titanium Technologies (TT) segment, questioning if its operations are more vulnerable to disruption while undergoing significant cost improvements. He also requested more detail on the Advanced Performance Materials (APM) outage, its earnings impact, and the timeline for resolution.

Answer

President & CEO Denise Dignam stated that cost-out efforts in TT are focused on productivity and have not impacted operational reliability, expressing confidence in the plan to fix recent discrete issues. Regarding the APM outage at Washington Works, she characterized it as a one-time '$20 million impact' isolated to Q3, caused by an external power outage, and expects the business to return to its strong Q2 performance trajectory in Q4.

Peter Osterland of Truist Securities asked about TiO2 pricing trends in regulated markets versus the rest of the world and sought expectations for the second quarter. He also inquired about any potential lingering margin impacts in Q2 from the weather-related outages experienced in Q1.

Answer

President and CEO Denise Dignam noted that while she would not comment on forward pricing, the company is seeing price stabilization and volume increases in fair trade markets. SVP and CFO Shane Hostetter confirmed the Q1 weather impacts were a one-time event and that the absence of these costs contributes to the guided earnings growth from Q1 to Q2, with no other lingering operational issues expected.

Peter Osterland asked what drove the outperformance on the TT transformation plan savings in 2024 and whether there could be upside to the new company-wide cost savings targets. He also asked if the guidance for positive free cash flow in 2025 holds true even at the low end of the EBITDA range.

Answer

CFO Shane Hostetter credited the 2024 savings beat to strong execution in manufacturing and fixed cash cost reductions. While confident in achieving the new $250 million target, he did not commit to upside at this early stage. He affirmed the company's commitment to positive free cash flow, stating that even at the low end of the EBITDA range, other levers like working capital management could be used to achieve that goal.

Pete Osterland from Truist Securities asked for a breakdown of the 2% sequential TiO2 volume decline between underlying demand and market share, and questioned what future efficiencies might be sacrificed due to new CapEx reductions.

Answer

CEO John Romano attributed the volume decline to a muted coatings season in North America and competitive pressures in Europe, while highlighting volume growth in India. Both Romano and CFO John Srivisal clarified that the CapEx cuts are focused on pausing discretionary projects to preserve cash, while strategic mining investments in South Africa remain on track.

Peter Osterland inquired about the drivers for 2025 TiO2 volume growth, expected plant utilization rates post-Botlek closure, the reasons for the reduced CapEx guidance, and the company's normalized annual CapEx outlook.

Answer

CEO John Romano attributed TiO2 volume growth primarily to anti-dumping duties in Europe and anticipated duties in India and Brazil, and stated utilization rates would remain at or above 80%. CFO John Srivisal and CEO John Romano explained the CapEx reduction was half due to the Botlek idling and half from deferring other projects to meet cash flow targets. Srivisal projected normalized long-term CapEx to be $250-$300 million annually after current mining projects complete in 2026.

Peter Osterland requested details on the assumed volume growth for TiO2 and zircon within the 2025 guidance and asked about the company's market share expectations for the year.

Answer

CEO John Romano and CFO John Srivisal indicated that the guidance assumes high single-digit percentage volume growth for both TiO2 and zircon. Romano added that the company expects to regain market share previously lost to Chinese competitors, driven by the implementation of antidumping duties in key markets like Europe, Brazil, and soon India, where Tronox holds a strategic advantage.

Pete Osterland from Truist Securities asked about the impact of competitive activity on pet care pricing and margins, and sought an update on the timeline and sufficiency of the reserve for the ongoing talc litigation.

Answer

Chairman & CEO Douglas Dietrich explained that the company is supporting its private label partners with promotional activity, which can involve some pricing actions, to maintain their value proposition against branded products. He expressed confidence in the long-term global growth of the pet care market. Regarding the talc litigation, Dietrich stated there is no definitive timeline for resolution but noted a positive development with a federal court set to determine the factual question of asbestos content. He affirmed that the company believes the established reserve is sufficient and remains open to a consensual resolution plan.

Peter Osterland questioned whether the expected Q2 demand pickup was related to customer pre-buying ahead of tariffs. He also asked for an updated full-year outlook for free cash flow.

Answer

CFO Erik Aldag acknowledged that there was some minor pre-buying in the Asia foundry business in Q1, estimated at around $1 million, but noted this was offset by other customers delaying orders due to tariff uncertainty. He confirmed the Q2 forecast for Asia has been moderated as a result. Regarding cash flow, Aldag stated that despite a slow start due to working capital builds, the company still expects a strong year and is targeting free cash flow of around 7% of sales, which translates to approximately $150 million.

Peter Osterland of Truist Securities questioned the drivers behind the implied year-over-year margin pressure in the Q1 guidance and requested details on the sale of a refractory facility in China during the quarter.

Answer

CFO Erik Aldag attributed the Q1 margin pressure versus the prior year primarily to a softer product mix, as high-margin markets like high-temperature technologies were weaker. CEO Douglas Dietrich explained the China refractory facility sale was a strategic exit from a small footprint, prompted by the local government's desire to redevelop the land, with production being absorbed by other MTI facilities.

Peter Osterland from Truist sought clarification on the Q2 sales mix under long-term agreements and asked about the potential impact of new lithium derivatives contracts on the market.

Answer

CFO Neal Sheorey reiterated that as volumes ramp in Q2, a smaller percentage will be on LTAs compared to Q1, leading to lower margins. CEO Jerry Masters opined that new derivatives will have minimal initial impact due to low trading volumes, though they could become relevant for hedging over the long term if they gain traction.

Peter Osterland questioned whether the expected Q2 demand pickup was related to customers pre-buying ahead of tariff implementations and asked for an updated full-year free cash flow expectation.

Answer

CFO Erik Aldag acknowledged some minor pre-buying in the Asia foundry business in Q1 (approx. $1 million) but noted this was balanced by other customers holding off on orders due to tariff uncertainty. He stated the company still expects a strong year for free cash flow, forecasting around $150 million, which translates to approximately 7% of sales.

Peter Osterland questioned the drivers behind the implied year-over-year margin pressure in the Q1 guidance and sought more details on the rationale for selling a refractory facility in China.

Answer

CFO Erik Aldag explained that the Q1 margin pressure versus the prior year is primarily due to an unfavorable product mix, with softer demand in high-margin markets like high-temperature technologies, and a potential timing impact from passing through higher energy costs. CEO Douglas Dietrich clarified that the China asset sale involved a very small facility in a non-core refractory market, sold to the local government for development, with production easily absorbed by other MTI plants.