Olin Corporation OLN announced plans to permanently close down a 230,000-ton chlor alkali plant and its Vinylidene Chloride (VDC) production facility. The facilities are located in Freeport, TX.
The company expects that these closures will be completed before the end of 2020. Moreover, these initiatives are expected to reduce the company’s annual operating costs by around $35 million when completed.
In connection with these actions, Olin’s results for the fourth quarter of 2019 are expected to include roughly $65 million pretax non-cash restructuring (asset impairment) charges.
Per management, closure of the Freeport facility is expected to reduce the company’s annual fixed costs and match its production capacity with the market’s current needs. Also, Olin will be able to concentrate on the chlorine derivatives that generate the most value.
Shares of Olin have dipped 17.2% over a year compared with the industry’s decline of 20.4%.
In October, Olin stated that it expects to continue witnessing weaker demand from refrigerant agricultural, urethane, alumina, and pulp and paper customers. The company also anticipates caustic soda prices to decline in the fourth quarter.
Further, the Epoxy unit has witnessed lower product demand from industrial coatings, electrical laminate and automotive customers, thereby putting pressure on prices of epoxy resin.
The company predicts net income of $30-$59 million for 2019. Adjusted EBITDA for the year is expected in the band of $930-$980 million. Olin anticipates challenging demand and pricing environment to continue in the fourth quarter.
Olin Corporation Price and Consensus
Zacks Rank & Stocks to Consider
Olin currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the basic materials space are General Moly, Inc , Franco-Nevada Corporation FNV and Agnico Eagle Mines Limited AEM, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
General Moly has an expected earnings growth rate of 12.5% for the current fiscal year. The company’s shares have gained 55% in the past year.
Franco-Nevada has a projected earnings growth rate of 45.3% for 2019. The company’s shares have rallied 37.3% in a year.
Agnico Eagle has an estimated earnings growth rate of 167.9% for the current year. Its shares have moved up 54.5% in the past year.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>