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OLN may gain longer-term benefits from cost savings, hydrogen tax credits, and integration benefits.
Olin Corporation’s (OLN - Free Report) near-term performance remains exposed to macro environment pressures, including weak demand, industry oversupply, and elevated leverage, which could risk Olin’s growth. The Winchester segment also suffers from high input costs.
Near-Term Concerns for OLN
Olin’s chlor-alkali and related chemical businesses are facing weak demand and industry oversupply, which has hurt pricing and put pressure on profit margins. Excess supply continues to weigh on prices for products such as caustic soda, limiting profitability. The Epoxy segment also faces headwinds due to subsidized Asian importsand the U.S. markets for building and construction, automotive and consumer electronics. Management anticipates higher uncertainty in the timing of any chemical demand recovery as U.S. housing, European demand and Asian consumption recovery have not yet materialized.
In addition, Olin’s high debt level constrains its financial flexibility and operating performance. Total debt has remained unchanged from the prior year, keeping leverage elevated. This heavy debt burden can risk long-term sustainability and increase exposure to interest rate fluctuations. If cash flow from operations declines, servicing debt could become more challenging, and refinancing may come at higher costs.
Olin continues to face near-term pressure in the Winchester segment from rising metal input costs, particularly copper, which is expected to surge even more. At the same time, retailers that had built elevated inventories ahead of supply shortages and the U.S. presidential election are actively destocking as consumer spending remains slow. In response to these conditions, Olin had to implement production cuts and shift toward a make-to-order operating model to better align output with demand and limit further inventory build.
However, in the longer term, Olin is expected to benefit from ongoing cost-savings initiatives and advantages from clean hydrogen tax credits, which will strengthen margins and cash flow generation.
Olin will also continue to benefit from in-depth resource planning, engineering, and manufacturing systems integration across its operations and the acquired Dow Chlorine Products businesses. The company also forged a partnership with Braskem, one of the largest petrochemical companies in the Americas and the leading producer of polyvinyl chloride in South America.
Its key cost-savings program, Beyond250, is driving sustained efficiency gains and tighter cost control. Management expects that the program will deliver $70 million to $90 million in annual run-rate savings, with benefits becoming increasingly visible from late 2025. The initiative is focused on operational efficiencies, workforce productivity, and manufacturing discipline. These are set to support margin expansion and profitability during cyclical downturns and enhance cash flow generation.
Olin is positioned to benefit from the U.S. Clean Hydrogen Production Tax Credit (45V), which provides incentives for low-carbon hydrogen production. Olin’s primary business, chlor-alkali, generates hydrogen as a by-product, and requisite volumes are expected to earn substantial tax credits, contributing to an improved adjusted EBITDA.
Olin’s Price Performance
Shares of the company have declined 2% in the past six months compared with the industry’s 14% fall.
Image Source: Zacks Investment Research
OLN’s Zacks Rank & Key Picks
OLN currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Basic Materials space are Kinross Gold Corporation (KGC - Free Report) , Agnico Eagle Mines (AEM - Free Report) and Carpenter Technology Corporation (CRS - Free Report) .
The Zacks Consensus Estimate for KGC’s current-year earnings is pegged at $1.67 per share, indicating a rise of 145.59%. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing once, with an average surprise of 17.37%.
The Zacks Consensus Estimate for AEM’s current-year earnings is pegged at $2.01 per share, indicating a rise of 59.52%. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 11.63%. KGC’s shares have gained 119.1% over the past year.
The Zacks Consensus Estimate for CRS’ current-year earnings stands at $2.19 per share, implying a 31.93% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 9.35%.
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Olin Suffers From High Debt Burdens and Dampened Demand
Key Takeaways
Olin Corporation’s (OLN - Free Report) near-term performance remains exposed to macro environment pressures, including weak demand, industry oversupply, and elevated leverage, which could risk Olin’s growth. The Winchester segment also suffers from high input costs.
Near-Term Concerns for OLN
Olin’s chlor-alkali and related chemical businesses are facing weak demand and industry oversupply, which has hurt pricing and put pressure on profit margins. Excess supply continues to weigh on prices for products such as caustic soda, limiting profitability. The Epoxy segment also faces headwinds due to subsidized Asian importsand the U.S. markets for building and construction, automotive and consumer electronics. Management anticipates higher uncertainty in the timing of any chemical demand recovery as U.S. housing, European demand and Asian consumption recovery have not yet materialized.
In addition, Olin’s high debt level constrains its financial flexibility and operating performance. Total debt has remained unchanged from the prior year, keeping leverage elevated. This heavy debt burden can risk long-term sustainability and increase exposure to interest rate fluctuations. If cash flow from operations declines, servicing debt could become more challenging, and refinancing may come at higher costs.
Olin continues to face near-term pressure in the Winchester segment from rising metal input costs, particularly copper, which is expected to surge even more. At the same time, retailers that had built elevated inventories ahead of supply shortages and the U.S. presidential election are actively destocking as consumer spending remains slow. In response to these conditions, Olin had to implement production cuts and shift toward a make-to-order operating model to better align output with demand and limit further inventory build.
However, in the longer term, Olin is expected to benefit from ongoing cost-savings initiatives and advantages from clean hydrogen tax credits, which will strengthen margins and cash flow generation.
Olin will also continue to benefit from in-depth resource planning, engineering, and manufacturing systems integration across its operations and the acquired Dow Chlorine Products businesses. The company also forged a partnership with Braskem, one of the largest petrochemical companies in the Americas and the leading producer of polyvinyl chloride in South America.
Its key cost-savings program, Beyond250, is driving sustained efficiency gains and tighter cost control. Management expects that the program will deliver $70 million to $90 million in annual run-rate savings, with benefits becoming increasingly visible from late 2025. The initiative is focused on operational efficiencies, workforce productivity, and manufacturing discipline. These are set to support margin expansion and profitability during cyclical downturns and enhance cash flow generation.
Olin is positioned to benefit from the U.S. Clean Hydrogen Production Tax Credit (45V), which provides incentives for low-carbon hydrogen production. Olin’s primary business, chlor-alkali, generates hydrogen as a by-product, and requisite volumes are expected to earn substantial tax credits, contributing to an improved adjusted EBITDA.
Olin’s Price Performance
Shares of the company have declined 2% in the past six months compared with the industry’s 14% fall.
Image Source: Zacks Investment Research
OLN’s Zacks Rank & Key Picks
OLN currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Basic Materials space are Kinross Gold Corporation (KGC - Free Report) , Agnico Eagle Mines (AEM - Free Report) and Carpenter Technology Corporation (CRS - Free Report) .
At present, KGC and AEM sport a Zacks Rank #1 (Strong Buy) each, while CRS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for KGC’s current-year earnings is pegged at $1.67 per share, indicating a rise of 145.59%. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing once, with an average surprise of 17.37%.
The Zacks Consensus Estimate for AEM’s current-year earnings is pegged at $2.01 per share, indicating a rise of 59.52%. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 11.63%. KGC’s shares have gained 119.1% over the past year.
The Zacks Consensus Estimate for CRS’ current-year earnings stands at $2.19 per share, implying a 31.93% year-over-year increase. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise of 9.35%.