Hotchkis & Wiley, an investment management company, released its “Hotchkis & Wiley Mid-Cap Value Fund” third-quarter 2025 investor letter. A copy of the letter can be downloaded here. In the third quarter of 2025, equity markets posted strong gains with the S&P 500 Index, Nasdaq Composite, Dow Jones Industrial Average, and Russell 2000 Index hitting all-time highs. Enthusiasm over artificial intelligence (AI), a long-awaited Federal Reserve rate cut, and stronger-than-expected corporate earnings supported t ...

This global chemicals and ammunition producer saw a key insider trim their stake after a challenging year for the company’s shares.Teresa M. Vermillion, VP & Treasurer, executed the sale of 4,500 shares of Olin Corporation (OLN 4.71%) via option exercise and immediate disposition, as disclosed in this SEC Form 4 filing.Transaction summaryMetricValueShares sold4,500Transaction value~$93,850.20Post-transaction shares17,199Post-transaction value (direct ownership)~$353,783.43Key questionsWhat is the structure ...

Core Insights - Olin Corporation has entered a long-term strategic partnership with Braskem to supply ethylene dichloride (EDC), enhancing its position in the global vinyls chain [1][7] - The partnership aims to support Braskem's transformation of its chlor-alkali and vinyl operations in Brazil, a key market for competitiveness and operational performance [1][4] - Olin's strategy focuses on leveraging its cost-advantaged EDC platform to create sustained value in high-growth regions, particularly in the Brazilian PVC market [2][4] Strategic Developments - The dissolution of the Blue Water Alliance joint venture allows Olin to redirect more EDC output into high-value relationships, enhancing strategic and financial stability [3][7] - This shift is part of Olin's broader effort to reshape its portfolio around durable, value-accretive customer relationships [3][4] - The partnership with Braskem aligns with Olin's disciplined growth strategy within its core chlor-alkali and vinyls business, aiming to improve returns and long-term value creation [4][7] Market Performance - Olin's shares have declined by 40.5% year to date, compared to a 27.3% decline in the industry [5]

Core Insights - Olin Corporation has formed a strategic partnership with Braskem to supply ethylene dichloride (EDC), enhancing Olin's position in the Brazilian PVC market [2][4] - The partnership aligns with Braskem's transformation of its chlor-alkali and vinyl assets in Brazil, marking a significant step in Olin's global vinyls strategy [2][4] - Olin's decision to dissolve its Blue Water Alliance joint venture allows for a redirection of EDC towards more valuable relationships, further advancing its strategy in the high-growth Brazilian market [3][4] Company Overview - Olin Corporation is a leading global manufacturer and distributor of chemical products, including chlorine, caustic soda, and vinyls, as well as a major U.S. manufacturer of ammunition [5]

Core Viewpoint - Olin Corp reported mixed financial results for the third quarter, with earnings exceeding expectations but sales falling short of analyst estimates [1][2]. Financial Performance - The company posted quarterly earnings of 37 cents per share, surpassing the analyst consensus estimate of 11 cents per share [1]. - Quarterly sales amounted to $1.713 billion, which was below the analyst consensus estimate of $1.735 billion [1]. Management Commentary - Ken Lane, President and CEO, highlighted that earnings were driven by the Chlor Alkali Products and Vinyls segment, despite limited seasonal demand growth in a challenging market [2]. - The company focused on preserving its Electrochemical Unit (ECU) values during this period [2]. Stock Performance - Following the earnings announcement, Olin shares increased by 6.2%, trading at $22.33 [2]. Analyst Ratings and Price Targets - Keybanc analyst Aleksey Yefremov maintained an Overweight rating but reduced the price target from $30 to $29 [5]. - Wells Fargo analyst Michael Sison kept an Equal-Weight rating and lowered the price target from $25 to $22 [5]. - Truist Securities analyst Peter Osterland maintained a Hold rating and decreased the price target from $22 to $21 [5]. - UBS analyst Joshua Spector maintained a Neutral rating and cut the price target from $24 to $22 [5].

Core Viewpoint - Olin Corporation (NYSE:OLN) is experiencing significant stock decline due to a lowered price target and a disappointing EBITDA forecast for the fourth quarter, leading to a 12.45% drop in stock price [1][2][3]. Financial Performance - Olin Corporation reported a net income of $42.8 million in the third quarter, a recovery from a net loss of $24.9 million in the same period last year [3]. - Sales increased by 7.8% year-on-year, reaching $1.7 billion compared to $1.59 billion [3]. Fourth Quarter Outlook - The company anticipates a weak fourth quarter, typically its lowest seasonal quarter, with adjusted EBITDA guidance set between $110 million and $130 million, significantly below the consensus estimate of $169 million [2][4]. - The guidance includes a $40 million penalty due to planned inventory reductions in response to expected weaker demand [3][5]. Analyst Actions - Mizuho Securities has downgraded Olin's price target from $28 to $25 while maintaining a "neutral" stance on the stock [2].

Core Insights - Olin Corporation (NYSE:OLN) is a prominent manufacturer in the chemicals and ammunition sector, operating in three segments: Chlor Alkali Products and Vinyls, Epoxy, and Winchester [1] - Truist Financial has set a new price target of $21 for OLN, reflecting a cautious outlook as the stock price has decreased by approximately 12.45% [2][5] Financial Performance - Olin Corporation's Q3 2025 earnings call provided insights into its financial performance, with key participants including CEO Kenneth Lane and CFO Todd Slater [3] - The company's market capitalization is around $2.41 billion, with a trading volume of 8,865,319 shares on the NYSE [4] Market Volatility - The stock has experienced significant volatility over the past year, with a high of $44.76 and a low of $17.66, which may have influenced the decision to lower the price target [4][5] - The stock price has fluctuated recently, reaching a low of $20.05 and a high of $21.76 on the day of the price target adjustment [2]

Core Insights - Olin's stock dropped 13.7% after missing revenue expectations while exceeding earnings forecasts [1][7] - The company reported Q3 earnings of $0.37 per share against an expectation of $0.09, but revenue was $1.71 billion, below the anticipated $1.73 billion [1][3] - Year-to-date sales reached $5.1 billion, reflecting a 5% year-over-year increase, with Q3 sales growth at 7.7% [3][4] Financial Performance - Olin's Q3 earnings surpassed expectations, marking a significant improvement from a loss in Q3 of the previous year [4] - Despite the positive earnings, the company faces challenges in Q4, forecasting EBITDA between $110 million and $130 million [6] Market Conditions - CEO Ken Lane highlighted ongoing market challenges, including competition from subsidized Asian materials and high inventories of commercial ammunition [5] - The current market environment is described as "persistently challenging," impacting overall performance [5] Valuation - Olin's stock is currently valued at 49 times trailing earnings, which is considered high given the anticipated weak performance in Q4 [6]

Financial Performance - Olin Corporation reported a net income of $42.8 million for the three months ended September 30, 2025, compared to a net loss of $24.9 million for the same period in 2024[25]. - Total sales for the three months ended September 30, 2025, reached $1,713.2 million, with segment sales from Chlor Alkali Products and Vinyls at $924.0 million, Epoxy at $349.6 million, and Winchester at $439.6 million[76]. - The company reported an income before taxes of $41.5 million for the three months ended September 30, 2025, with a significant loss of $32.2 million in the Epoxy segment[76]. - Total sales for the nine months ended September 30, 2025, reached $5,115.7 million, a 5.1% increase from $4,868.8 million in the same period of 2024[77]. - Income before taxes for the nine months ended September 30, 2025, was $36.8 million, a significant decline from $131.7 million in the same period of 2024[77]. Restructuring and Charges - The company incurred cumulative restructuring-related cash expenditures of $152.2 million and non-cash charges of $79.9 million as of September 30, 2025, with an expected additional $75.0 million in restructuring charges through 2030[23]. - Olin's total cumulative restructuring charges reached $240.7 million through September 30, 2025, with significant charges related to facility closures and employee severance[21]. - The company reported restructuring charges of $14.3 million for the nine months ended September 30, 2025[77]. Assets and Liabilities - The company’s inventories, net, increased to $966.9 million as of September 30, 2025, from $823.5 million as of December 31, 2024[27]. - Olin's other assets totaled $1,170.4 million as of September 30, 2025, with supply contracts accounting for $986.4 million[29]. - Goodwill balance as of September 30, 2025, is $1,425.9 million, with a cumulative impairment of $557.6 million in Chlor Alkali Products and $142.2 million in Vinyls and Epoxy[33]. - Total debt as of September 30, 2025, is $2,993.4 million, an increase from $2,842.2 million as of December 31, 2024[35]. - The company has accrued liabilities for legal actions amounting to $18.7 million as of September 30, 2025[82]. Cash Flow and Financing - The company issued $600.0 million of 6.625% senior notes due April 1, 2033, on March 14, 2025[36]. - The 2025 Senior Credit Facility was increased to $1,850.0 million, extending the maturity date to March 14, 2030[37]. - Total borrowings for the nine months ended September 30, 2025, were $2,485.0 million, compared to $587.4 million for the same period in 2024[45]. - The company had $470.0 million drawn under Receivables Financing Agreements as of September 30, 2025[43]. - The company remains in compliance with all covenants and restrictions under its outstanding debt agreements as of September 30, 2025[41]. Tax and Pension - The tax benefit for the three months ended September 30, 2025, was $2.2 million, resulting in a negative effective tax rate of 5.3%, significantly lower than the 21.0% U.S. federal statutory rate[52][53]. - For the nine months ended September 30, 2025, the company recorded a tax benefit of $5.3 million, leading to a negative effective tax rate of 14.4%, compared to a tax expense of $36.8 million and an effective tax rate of 27.9% for the same period in 2024[54]. - The company made cash contributions to its international qualified defined benefit pension plans of $0.6 million for the nine months ended September 30, 2025, down from $0.9 million in 2024[51]. Stock and Compensation - Stock-based compensation expense for the three months ended September 30, 2025, was $8.6 million, compared to $6.6 million in 2024[63]. - The company repurchased 1.7 million shares of common stock for a total value of $40.4 million during the nine months ended September 30, 2025, compared to 4.9 million shares for $256.8 million in 2024[69]. - The company has $1.3 billion remaining available under the 2024 Repurchase Authorization program, with no repurchases made under this program as of September 30, 2025[69]. Segment Performance - The gross margin for the total sales in the same period was $183.4 million, with a gross margin of $166.0 million from Chlor Alkali Products and Vinyls, and a loss of $17.8 million from the Epoxy segment[76]. - Non-operating pension income for the three months ended September 30, 2025, included $4.9 million, contributing to the overall financial performance[76]. - Environmental provisions charged to income for the nine months ended September 30, 2025, amounted to $15.3 million, down from $19.4 million in the same period of 2024[80]. Commodity and Currency Risk - The company had outstanding forward contracts to sell foreign currency with a notional value of $141.0 million as of September 30, 2025, compared to $133.7 million at December 31, 2024, and $148.8 million at September 30, 2024[87]. - A hypothetical 10% increase in commodity prices would lead to a $23.4 million increase in the cost of inventory purchased as of September 30, 2025[202]. - The company uses cash flow hedges for certain raw material and energy costs to provide stability against price fluctuations[89]. - The net impact of commodity risk, foreign currency risk, or interest rate risk on cash flow may differ materially from expectations if actual changes are substantially different[207].

Financial Data and Key Metrics Changes - In Q3 2025, adjusted EBITDA was $190 million, an 8% sequential improvement, excluding a $32 million pre-tax benefit from the Clean Hydrogen Production tax credit [14][15][16] - The company experienced an increase in net debt due to unforeseen payment delays from the U.S. government, but expects working capital to be a source of at least $100 million of cash for 2025 [16][17] Business Line Data and Key Metrics Changes - The core alkaline products and vinyls business showed strong performance, driven by lower operating costs and higher ethylene dichloride volumes, while the epoxy business faced significant headwinds from subsidized imports [5][14] - Winchester's commercial ammunition business was negatively impacted by high retail inventories, leading to a 5-10% decrease in sales, while military demand remained strong [10][11][15] Market Data and Key Metrics Changes - Global epoxy resin demand remains weak, particularly in Europe, while U.S. demand has been more resilient [8][9] - The caustic soda market has shown stability, with demand holding up well in key end markets like alumina and water treatment [7][8] Company Strategy and Development Direction - The company is focused on a value-first commercial strategy, maximizing cash generation, and reducing working capital [6][18] - The dissolution of the Blue Water Alliance joint venture is aimed at simplifying operations and enhancing control over the EDC market [7][42] - The company is shifting towards a make-to-order model in Winchester to reduce working capital and align production with demand [11] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the epoxy business in 2026, citing cost reductions and potential market improvements [50][79] - The company anticipates stable ECU values in the fourth quarter despite seasonally lower demand [18][67] - Management highlighted the need for a recovery in the housing market to drive demand for chemicals, particularly in North America [62] Other Important Information - The company expects an annual adjusted EBITDA benefit of $15 million to $20 million from the Clean Hydrogen Production tax credit for the years 2026 through 2028 [15][87] - The company plans to take a $40 million EBITDA penalty in Q4 to reduce inventories and support its commercial strategy [20][31] Q&A Session Summary Question: Guidance for 2026 and potential EBITDA increments - Management indicated a focus on cost reductions and the Dow contract, expecting a $70 to $90 million run rate improvement into 2026 [24][25] Question: Section 45V credit details - The $32 million benefit was a catch-up, with ongoing benefits expected to be $15 to $20 million annually from 2026 to 2028 [27][87] Question: Working capital situation in Q3 - Increased working capital was attributed to delayed payments from the U.S. government and inventory buildup in anticipation of stronger demand [30][33] Question: Impact of inventory penalties - The $40 million penalty is primarily related to Winchester, with expectations of a return to normal operating rates in Q1 2026 [35][39] Question: Update on supply agreements - The company is working on more structural term agreements for ECU, moving away from spot market reliance [41][42] Question: Update on Radnor Propellants contract - The bidding process is slow due to government shutdowns, with no immediate decisions expected [44] Question: Epoxy business outlook - Management expressed optimism for improvements in the epoxy business due to cost reductions and market rationalization [50][79] Question: Caustic soda market expectations - Higher caustic values are anticipated in Q4 due to seasonal supply restrictions [67][68] Question: Turnaround costs for VCM - Turnaround costs are expected to increase, with a detailed outlook to be provided in the next earnings call [70][72] Question: Capital allocation priorities - The company plans to prioritize debt reduction and maintain a disciplined approach to share repurchases [75] Question: Revenue mix between commercial and defense in Winchester - The military segment is expected to grow, with a current mix of 62% military and 38% commercial [56][59]