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 [12][13] - The company generated positive operating cash flow, although it fell short of cash flow and working capital targets, resulting in an increase in net debt for the period [14][16] Business Line Data and Key Metrics Changes - The core alkaline products and vinyls business showed robust results, driven by lower operating costs and higher ethylene dichloride volumes, while maintaining stable ECU values [4][12] - The epoxy business faced significant headwinds, with global demand remaining weak, particularly in Europe and the U.S., but formulated solutions volume improved sequentially [6][12] - Winchester's commercial ammunition business was negatively impacted by high retail inventories, leading to a 5-10% decrease in sales, while military demand continued to grow [9][10][12] Market Data and Key Metrics Changes - Global caustic soda demand remained stable, with some weakness in pulp and paper markets offset by strong demand in alumina and water treatment [5] - The epoxy market faced challenges from subsidized imports from Asia, affecting pricing and margins [6][12] - The military market showed resilience, with increasing demand from NATO countries [10][12] Company Strategy and Development Direction - The company is focused on a value-first commercial strategy, maximizing cash generation, and disciplined capital allocation while preparing for a demand recovery [4][12] - The dissolution of the Blue Water Alliance joint venture aims to simplify operations and enhance strategic management in the EDC market [5][39] - The "Beyond 250" initiative focuses on right-sizing production assets, streamlining operations, and improving operating efficiencies [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the market environment but expressed optimism about potential improvements in the epoxy business due to cost reductions and capacity rationalization [17][46] - The company expects stable ECU values in the fourth quarter despite seasonally lower demand, with a projected adjusted EBITDA range of $110 to $130 million [19] - Management highlighted the importance of a recovery in the housing market and global demand growth for chemicals to drive future performance [56][58] Other Important Information - The company secured eligibility for Section 45V Clean Hydrogen Production tax credits, expected to provide an annual adjusted EBITDA benefit of $15 million to $20 million from 2026 to 2028 [12][13] - A planned maintenance in the epoxy business is anticipated to present a $14 million sequential headwind to earnings [8] 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 [21][23] 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 [25] Question: Working capital situation in Q3 - Increased working capital was attributed to inventory buildup and delayed payments from the U.S. government, which were received in October [27][31] Question: Impact of inventory penalty on EBITDA - A $40 million penalty in Q4 is expected to free up about $150 million in cash, with a focus on reducing inventory levels [33][34] Question: Update on supply agreements - The company is working on structural term agreements for ECU, moving away from spot market reliance [38][39] Question: Update on Radnor Propellants contract and metals hedging - The bidding process is slow due to government shutdowns, and metal costs are expected to be a headwind in 2026 [40][42] Question: Epoxy business outlook - Management expressed optimism for the epoxy business in 2026 due to cost reductions and capacity rationalization [44][46] Question: U.S. caustic soda market outlook - Higher caustic values are expected in Q4, supported by stable demand in alumina and reduced supply due to seasonal factors [60][62] Question: Turnaround costs for VCM - Turnaround costs for 2026 are still being finalized, with updates expected in the next earnings call [63] Question: Capital allocation priorities and share repurchases - The company plans to prioritize debt reduction while maintaining a modest pace of share repurchases [66] Question: AMMO acquisition update - The acquisition is on track to deliver expected synergies, with positive integration into the Winchester brand [74]