Presentation slides for meeting on June 15, 2006

EX-99.2 3 dex992.htm PRESENTATION SLIDES FOR MEETING ON JUNE 15, 2006 Presentation slides for meeting on June 15, 2006

Morgan Stanley

2006

Small

Cap

Executive

Conference

June 15, 2006

Exhibit 99.2

Attending Today

Joseph D. Rupp

Chairman, President and Chief

Executive Officer

John E. Fischer

Vice President and Chief Financial

Officer

John L. McIntosh

President, Chlor Alkali Products

Larry P. Kromidas

Assistant Treasurer and Director,

Investor Relations

Company Overview

All

financial

data

are

for

the

year

ending

2005

and

millions

U.S.

dollars.

Shown

above

income

before

taxes

from

contin

uing

operations.

Additional

information

available

Olin’s

website

www.olin.com

the

Investor

Relations

section.

Winchester

Chlor Alkali

North American Producer of

Chlorine and Caustic Soda

Revenue:

$610

Income:

$237

North American Producer of

Ammunition

Revenue:

$345

Income:

Metals

Specialty Copper-Based

Products and Related

Engineered Materials

Revenue:

$1,403

Income:

$34

Revenue: $2,358

Pretax Inc. from Cont. Ops.: $226

Earnings Per Diluted Share: $1.86

Olin

Year Ending Dec. 31, 2005

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

•

Following our customers globally where we can do it

profitably

•

Generating returns above the cost of capital over the

economic cycle

Olin Corporate Strategy

1. Build on current leadership positions in Chlor-Alkali,

Metals and Ammunition

•

Improve operating efficiency and profitability

•

Integrate downstream selectively

•

Expand globally

2. Allocate resources to the businesses that can create the

most value

3. Manage financial resources to satisfy legacy liabilities

TRS in Top Third S&P Mid Cap 400

ROCE Over Cost of Capital Over the Cycle

Olin Corporation Goal: Superior Shareholder Returns

2005 Highlights

•

Significant improvement in Chlor Alkali Products

Pricing

•

Unprecedented increases in natural gas and commodity

metal costs

•

Corporate restructuring and relocation completed

•

Environmental recoveries of $50 million for costs

incurred and expensed in prior periods

•

Voluntary pension contribution of $6 million

•

Debt of $52 million repaid

•

Increase in cash by $150 million

•

Hurricane impacts

First Quarter 2006

•

Record ECU netbacks resulted in record quarterly

Chlor Alkali Products earnings of $73.9 million

•

Continued cost increases for copper hindered

Metals results

•

Metals restructuring charge of $15.7 million

substantially offset by $13.5 million LIFO

inventory gain

•

Higher year-over-year pension costs ($3MM) and

expensing of stock options ($1MM)

•

Earnings per share of $.47

Second Quarter 2006 Outlook

•

Chlor Alkali Products lower ECU netbacks in

second quarter versus first quarter, but higher than

2005 levels

•

Metals earnings are projected to be lower than the

first quarter of 2006 due to higher copper, natural

gas and other costs

•

Winchester expected second quarter 2006 earnings

to be lower than Q1 due to normal seasonal

factors, but in line with second quarter of 2005

•

In April we projected our EPS to be in the $.40

per diluted share range in the second quarter

•

Be the preferred merchant supplier to non-integrated

chlor

alkali customers

•

Continue to drive cost improvements through

manufacturing and logistic optimization

•

Continue our partnership philosophy with our

customers

•

Significant opportunities to increase the value of the

business at modest capital cost

•

Be a strong cash generator and value enhancer to Olin

Corporation

Olin’s Chlor Alkali Strategy

Olin Has Leading Capacity Share in

Eastern U.S.

Source:

CMAI Chlor Alkali Report

•

Overall in U.S. Capacity

•

Largest Producer East of

the Mississippi River

•

Olin Has 1.24 Million tons

ECU Capacity Per Year

(1)

•

A $10 / ECU Change

Equates to an $11 Million

Change in Pretax Income at

Full Capacity, or $.11 per

share @ 37% tax rate

Dow

32%

Occidental

22%

PPG

12%

Olin

Formosa

Pioneer

Georgia Gulf

Mexichem

Bayer

Other

(1)

Includes 50% of SunBelt

Chlor Alkali

Products

•

Chlorine and Caustic contracts resetting in 2006

•

Hurricanes did not damage any Olin plants, but

disrupted customers and rail lines

•

Higher transportation and energy costs, Olin system

less dependent on natural gas

•

Co-product strategies / expansions

–

Bleach

–

Hydrochloric Acid

ECU Netbacks

2005

2006

1st Quarter

$ 485

$590

2nd Quarter

$ 505

3rd Quarter

$ 515

4th Quarter

$ 545

Olin’s Chlor Alkali Contracts

•

Olin contracts nearly 100% of its chlorine and

caustic sales

•

On about two-thirds of the chlorine and caustic

volumes, prices change quarterly, with a

combination of formula-based and negotiated

pricing, the balance is renegotiated annually or

semi-annually

•

Many contracts have a one quarter lag in them,

which delays price increases in a tightening

market, but helps in a softening market

•

Competitive forces dictate contract duration and

terms

•

Olin’s electricity costs have increased over the last five

years, but have remained well below Natural Gas

generated electricity prices

•

Olin purchases power from Utilities that generate

electricity principally from coal, nuclear and hydro

sources

•

We, and others, believe that higher Natural Gas prices

have raised the floor on ECU prices for the future

($1 / MMBTU = $25-$35 / ECU)

Olin’s Energy Position

Metals

•

Olin is the leading manufacturer of copper alloy

strip and brass rod in the U.S.

•

Our large size provides economies of scale and

manufacturing efficiencies

•

Olin possesses leading technology position

•

Olin is the leading copper based sheet and strip

distributor in the U.S.

Metals

•

Volumes in the first quarter were up 11% for the

strip business, but down 5% in rod over the fourth

quarter of last year

•

Higher natural gas prices and metal melting losses

due to higher copper prices reduced earnings by

$2.1 million each from first quarter 2005 to first

quarter of 2006

•

Actions initiated to reduce costs $9 to $10 million

annually include the shut down of Waterbury

Rolling Mills plant and consolidation of

production to East Alton, and overhead reductions.

Benefits of these actions to be realized in second

half of 2006

Metals Outlook

•

Earnings improvement opportunities through the

likely combination of plant closures, realignments

and headcount reductions to be completed in 2006

•

Limited expansion of our China distribution

facility by adding stamping capabilities

•

We believe that we are the low cost metals

producer in the U. S. putting us in a preferred

position with regards to profitability

Winchester Products

Products

End Uses

Maintenance applications in power & concrete

industries, powder-actuated tools in construction

industry

Industrial products --

gauge loads & powder-

actuated tool loads

Infantry and mounted weapons

Small caliber military

ammunition

Hunters & recreational shooters, law

enforcement agencies

Winchester ®

sporting

ammunition --

shot-

shells, small caliber

centerfire & rimfire

ammunition

Winchester

•

Higher sales volumes to commercial, military and

law enforcement customers were more than offset

by increased copper, lead, steel and resin costs

•

Price increases announced for 2006 to offset

higher commodity prices

•

Cost improvements through relocation of rimfire

operations to Oxford, MS facility

•

Olin, as part of the General Dynamics team, was

awarded the second source small caliber

ammunition contract –

we expect military sales to

increase by about 13% from 2005 to 2006

Financial Highlights

•

2005 cash generation supported by use of

approximately $60 million of net operating loss

carryforwards

•

Recovery of $50 million of environmental costs

offset higher legal and legal related costs

•

$6 million voluntary pension contribution in

September 2005

•

Repaid $52 million of debt in 2005, modest

amounts due in 2006

Financial Highlights

(continued)

•

2006 pension expense expected to increase by

approximately $10 million over 2005

•

Expensing $3 million of stock options begins 2006

•

Pension plan frozen to new salaried and East

Alton bargain unit employees

•

2006 effective tax rate expected to be in the 37%

range

•

Capital spending levels are expected to be slightly

more than 2006 projected depreciation of $74

million

Investment Rationale

•

Improved performance based on

–

Relatively high ECU prices

–

Cost reductions and restructuring in Metals

–

Cost reductions and increased Military revenue

in Winchester

•

Strong financial discipline

•

Commitment to investment grade credit rating

•

At current price levels, dividend yield

approximately 4.5%

•

Dividend for 318 consecutive quarters

Forward-Looking Statements

This presentation contains estimates of future

performance, which are forward-looking

statements and 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, 2005 and in

Olin’s First Quarter 2006 Earnings Release. These

reports are filed with the U.S. Securities and

Exchange Commission.