EX-99.1 2 keybancslides091108ver5.htm PRESENTATION SLIDES FOR MEETING ON SEPTEMBER 11, 2008 keybancslides091108ver5.htm
1
KeyBanc Basic Materials &
Packaging Conference

September 11, 2008
Exhibit 99.1
 
 
 
2
Olin Representatives
John E. Fischer 
 Vice President & Chief Financial Officer
John L. McIntosh 
 Vice President & President, Chlor Alkali Products
Larry P. Kromidas 
 Assistant Treasurer & Director, Investor Relations
 lpkromidas@olin.com
 (618) 258 - 3206
 
 
 
3
Investment Rationale
• Strong outlook based on:
 – Historically high ECU prices
 – Benefits from the Pioneer acquisition
 – Increasing profitability from Winchester
• Strong balance sheet with no debt maturities until
 2011
• Substantial cash flow supports 81+ year continuous
 common dividend with above average yield
 
 
 
4
Olin Vision
To be a leading Basic Materials company delivering
attractive, sustainable shareholder returns
 • Being low cost, high quality producer, and #1 or
 #2 supplier in the markets we serve
 • Providing excellent customer service and
 advanced technological solutions
 • Generating returns above the cost of capital over
 the economic cycle
 
 
 
5
Total Return to Shareholders in Top Third of S&P Mid Cap 400
Return on Capital Employed Over Cost of Capital Through the Cycle
Olin Corporation Goal: Superior Shareholder Returns
Olin Corporate Strategy
1. Build on current leadership positions in Chlor-Alkali
 and Ammunition
 • Improve operating efficiency and profitability
 • Integrate downstream selectively
2. Allocate resources to the businesses that can create the
 most value
3. Manage financial resources to satisfy legacy liabilities
 
 
 
6
Impact of Strategic Actions
“The New Olin”
• Improved profitability
• Improved product mix with increased value-added
 bleach and greater geographic diversity
• Stronger balance sheet with reduced working capital
 investment and volatility
• $30 million per year lower legacy costs
 
 
 
7
Olin’s Chlor Alkali Strategy
• Be the preferred supplier to chlor alkali customers in
 addition to being the low cost producer
• Goal is to increase the value of the Chlor Alkali
 Division to Olin through:
 – Optimizing capacity utilization
 – Higher margin downstream products
 – Cost reduction and financial discipline
 
 
 
8
ECU = Electrochemical Unit; a unit of measure reflecting the chlor-alkali process outputs of
1 ton of chlorine, 1.13 tons of 100% caustic soda and 0.3 tons of hydrogen.
2
2
 
 
 
9
Pioneer Acquisition
• Synergistic, bolt-on acquisition that enhances our
 chlor-alkali franchise
 – Immediately accretive to earnings and cash flow that
 remains highly accretive throughout the cycle
 – Improves profitability through synergies and capacity
 optimization
 – Provides platform for value-added growth
 • #1 supplier of industrial bleach in North America
 • St. Gabriel, LA conversion and expansion
 
 
 
10
Synergies & Cost Reductions
• Approximately $10 million of synergies realized in Q2
• Original synergy forecast increased from $35 million
 annual rate to more than $40 million; about 10% of
 purchase price
• Synergies of $8 to $10 million annually expected to be
 realized from the Q2 Dalhousie, NB plant closing
• St. Gabriel, LA expansion/conversion expected to reduce
 annual energy costs by approximately $25 million and
 brine costs by approximately $5 million
 
 
 
11
Pioneer Acquisition moves Olin up to #3 Producer and…
Source: CMAI/Olin
Includes St. Gabriel conversion/expansion, Sunbelt joint venture and Dalhousie shutdown.
Presumes Shintech startup during 2008. Oxy includes OxyVinyls.
Chlorine Capacities
 
 
 
12
…
Enhances Olin
’
s Operational and Geographical Platform
39
Pioneer Chlorine Plants
Pioneer Bleach Plants
Source: /Olin
Tacoma, WA
Tracy, CA
Santa Fe Springs, CA
Henderson, NV
St. Gabriel, LA
McIntosh, AL
Augusta, GA
Charleston, TN
Niagara Falls, NY
Becancour
, Quebec
Olin Chlorine & Bleach Plants
1,955
Total
108
Augusta, GA
152
Henderson, NV
160
McIntosh, AL (50%
Sunbelt)
246
St. Gabriel, LA
(2)
248
Charleston, TN
286
Niagara Falls, NY
340
Becancour
, Quebec
(1)
415
McIntosh, AL
1,955
Total
108
Augusta, GA
152
Henderson, NV
160
Sunbelt)
246
St. Gabriel, LA
(2)
248
Charleston, TN
286
Niagara Falls, NY
340
Becancour
, Quebec
(1)
415
Chlorine Capacity
(
-
000 Short Tons)
Location
(1)
Pioneer
’
s
Becancour
Plant has 275,000 short tons
diaphragm and 65,000 short tons membrane capacity
(2)
Pioneer
’
s St. Gabriel plant includes the announced
49,000 short tons capacity expansion and conversion to
membrane cell
Plant Locations
 
 
 
13
• Industry pricing environment has improved through:
 – Net capacity reductions of about 12% since 2000
 – Higher natural gas prices have increased competitor
 manufacturing costs by $25 to $30 an ECU for every
 $1 increase in natural gas (the Olin system exposure to
 natural gas is less than 25%)
 – Weaker U.S. dollar and higher transportation costs
 have significantly reduced caustic imports
 – A $10 ECU change equals a $17 million change in
 pretax income at full operating capacity, all other items
 being unchanged, or $0.15/share at a 35% tax rate
 * ECU Netback = ECU price - freight +/- customer premiums/discounts
ECU Netback* Environment
 
 
 
14
Olin ECU Netback Outlook
• 1st half caustic price announcements totaling $490-495
 per ECU are supported by tight caustic supply, expected
 to be realized in Q3, Q4 and into 2009
• 3rd quarter caustic price announcement of $130 is
 expected to be realized in Q4 and Q1’09
• Higher ECU netbacks are driven by caustic pricing
 offsetting lower chlorine prices and higher freight costs:
   2006 2007 2008 2008 Caustic Price
   Netback Netback Netback Announcements
 Q1  $590 $500  $580   $ 80
 Q2  $560 $510  $590  $410 - $415
 Q3  $540 $540     $130 
 Q4 $520 $555     
 
 
 
15
Capacity Rationalization: 2000-2012
Source: Olin Data
Technology Key: DIA=Diaphragm, HG=Mercury, MB=Membrane, STB=Salt-to-Bleach.
Chlor Alkali Capacity Reductions
Chlor Alkali Capacity Expansions
Company
Location
Tech
ECU
COMPLETED
Dow
Ft. Saskatchewan
DIA
526,000
Dow
Plaquemine, LA
DIA
375,000
Formosa Plastics
Baton Rouge, LA
DIA
201,000
La Roche
Gramercy, LA
DIA
198,000
Oxy Vinyls LP
Deer Park, TX
DIA/HG
395,000
Georgia Pacific
(3 locations)
DIA/HG
24,000
Pioneer
Tacoma, WA
DIA/MB
214,000
Atofina
Portland, OR
DIA/MB
187,000
St. Anne Chem
Nackawic, NB
MB
10,000
PPG
Lake Charles, LA
HG
280,000
Oxy (KOH)
Taft, LA
HG
210,000
OXY
Delaware City, DE
HG
145,000
Olin (KOH)
Charleston, TN
HG
110,000
Holtra Chem
Orrington, ME
HG
80,000
Holtra Chem
Acme, NC
HG
66,000
Mexichem
Santa Clara, Mex
HG
40,000
Cedar Chem
Vicksburg, MS
HG
40,000
Olin
Dalhousie, NB
HG
36,000
ANNOUNCED
Dow
Freeport, TX
DIA
2,675,000
Olin
St. Gabriel, LA
HG
197,000
Canexus
North Vancouver, BC
DIA
145,000
ERCO
Port Edwards, WI
HG
80,000
Reductions
    
6,234,000
Reductions (6,234,000)
Expansions 5,121,000
Net Reduction (1,113,000)
Company
Location
Tech
ECU
COMPLETED
Dow
Freeport, TX
MB
500,000
PPG
Lake Charles, LA
MB
280,000
Oxy
Geismer, LA
MB
210,000
Equachlor
Longview, WA
MB
88,000
Westlake
Calvert City, KY
MB
80,000
SunBelt
McIntosh, AL
MB
70,000
Mexichem
Santa Clara, Mex
MB
45,000
Oxy
Various Sites
MB
22,000
AV Nackawic
Nackawic, NB
MB
10,000
Kuehne
Delaware City, DE
STB
40,000
Trinity
Hamlet, NC
STB
40,000
Odyssey
Tampa, FL
STB
30,000
BleachTech
Seville, OH
STB
20,000
ANNOUNCED
Dow1
Freeport, TX
MB
2,225,000
Shintech
Plaquemine, LA
MB
330,000
Shintech
Plaquemine, LA
MB
240,000
Westlake
Geismar, LA
MB
250,000
Olin
St. Gabriel
MB
246,000
Canexus
North Vancouver, BC
MB
180,000
ERCO
Port Edwards, WI
MB
80,000
Allied Universal
Fort Pierce, FL
STB
40,000
BleachTech
St. Petersburg, VA
STB
40,000
K2 Pure
Los Angeles, CA
STB
55,000
Expansions
    
5,121,000
Annual caustic demand growth: 0.8% or 110,000 Tons/Year
1 Dow’s supply agreement renewal with Shintech is expected to eliminate Shintech’s plans for a Chocolate Bayou plant.
 
 
 
16
Why Industrial Bleach
• Olin is the leading bleach producer with a current
 capacity of 250 million gallons, or 160,000 equivalent
 ECUs, in a 1 billion gallon market
• Bleach commands a $100 to $200 price premium over
 ECU selling prices
• Utilizes both chlorine and caustic soda
• Regional nature of bleach business benefits Olin’s
 geographic diversity
• Platform for future growth in fastest growing segment
 
 
 
17
Products
End Uses
Winchester ® sporting
ammunition -- shot-
shell, small caliber
centerfire & rimfire
ammunition
Hunters & recreational shooters, law
enforcement agencies
Small caliber military
ammunition
Infantry and mounted weapons
Industrial products -- 8
gauge loads & powder-
actuated tool loads
Maintenance applications in power & concrete
industries, powder-actuated tools in construction
industry
Winchester Products
 
 
 
18
Winchester’s Strategy
• Leverage existing strengths
 – Seek new opportunities to leverage the
 legendary Winchester® brand name
 – Investments that maintain Winchester as the
 retail brand of choice, and lower costs
• Focus on product line growth
 – Continue to develop new product offerings
• Provide returns in excess of Cost of Capital
 
 
 
19
Winchester
• Twelve price increases announced since beginning of
 2004 to offset higher metal prices
• Other U.S. manufacturers, including Remington and
 ATK, have implemented similar price increases
• Continued expansion of military and law enforcement
 business now accounts for 25 - 30% of total revenue:
 – Military awards of approximately $100 million in 2007
 – FBI awards of $54 million each in 2007 and 2008
 – 3rd and 4th deliveries of Second Source contract secured
 totaling approximately $60 million
 
 
 
20
Financial Highlights
• Strong Balance Sheet
 – Gross Debt / EBITDA is less than 1x
 – Ample liquidity with multi-year lines of credit
 totaling $350 million and cash of $207 million
 – Pension plan now over-funded
• Strong Profit Outlook
 – ECU price trend is favorable due to strength of caustic
 soda
 – Winchester performance continues to improve
 – Significant reduction in legacy costs
 
 
 
21
• Strong outlook based on:
 – Historically high ECU prices
 – Benefits from the Pioneer acquisition
 – Increasing profitability from Winchester
• Strong balance sheet with no debt maturities until
 2011
• Substantial cash flow supports 81+ year continuous
 common dividend with above average yield
Investment Rationale
 
 
 
22
Forward-Looking Statements
 This presentation contains estimates of future
 performance, which are forward-looking
 statements and actual results could differ
 materially from those anticipated in the forward-
 looking statements. Some of the factors that
 could cause actual results to differ are described
 in the business and outlook sections of Olin’s
 Form 10-K for the year ended December 31, 2007
 and in Olin’s Second Quarter 2008 Earnings
 Release. These reports are filed with the U.S.
 Securities and Exchange Commission.
 
 
 
23
1892 founded in East Alton, IL providing
blasting powder to Midwestern coal mines
1898 formed Westerner Cartridge Co to
manufacture small arms ammunition
1931 acquires Winchester Repeating Arms
1940s & 1950s acquires cellophane, paper,
lumber & powder-actuated tools businesses
1892 founded in Saltville, VA to produce
soda ash.
1896 builds first chlor-alkali plant in US
1909 introduces first commercial
production of liquefied chlorine
1940s & 1950s builds plants in Lake
Charles, LA & McIntosh, AL, buys Squibb
1954 Merger creates the Olin Mathieson Chemical Corporation
1950s & 1960 entered into phosphates, aluminum, urethanes, TDI, skis,
camping equipment, homebuilding and expanded paper and forestry businesses
1970s to 2000 consolidation back to core businesses, spin-offs included forest
products (Olinkraft), military ordinance (Primex) and specialty chemicals
(Arch) and sold aluminum, TDI, urethanes and Squibb businesses
2007 acquired Pioneer and sold the Metals business, resulting in a company
similar in businesses to that which existed in the late 1890s
 Olin Industries   Mathieson Chemical Corp.
Appendix
 
 
 
24
(1) Olin production capacity includes Sunbelt & other joint ventures. Source: CMAI - May, 2008
North American ECU Capacity
 
 
 
25
Source: CMAI, 2008
“Organics” includes: MDI, TDI, polycarbonates, monosodium glutamate, and more.
“Inorganics” includes: titanium dioxide (TiO2), sodium silicates, sodium cyanide, and more.
North American Chlorine
Demand by End Use
 
 
 
26
Source: CMAI, 2008
“Organics” includes: MDI, TDI, polycarbonates, monosodium glutamate, and more.
“Inorganics” includes: titanium dioxide (TiO2), sodium silicates, sodium cyanide, and more.
North American Caustic Soda
Demand by End Use