Citibank Investment Research Chemical Conference December 2, 2008 1 Olin Representatives Joseph D. Rupp Chairman, President & Chief Executive Officer 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 [email protected] (618) 258 3206 2 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 an 82 year continuous common dividend with above average yield * 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
3 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 4 Olin Corporate Strategy Olin Corporation Goal: Superior Shareholder Returns Total Return to Shareholders in Top Third of S&P Mid Cap 400 Return on Capital Employed Over Cost of Capital Through the Cycle 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 5 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 6 Olins 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 7 Chlor-alkali ECU Production Raw Materials Co-products Tons 1.8 Tons Salt Chlorine (CL2) 1.00 0.5 Tons Water 2.8 MWh Electricity
0.03 Caustic Soda (NaOH) 1.13 Hydrogen (H2) 8 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 9 Synergies & Cost Reductions Original synergy forecast increased from a $35 million annual rate to more than $45 million; or more than 10% of purchase price Approximately $10 million of synergies realized in Q3 Synergies from the Q2 2008 Dalhousie, NB plant closing are expected to yield $8 to $10 million annually St. Gabriel, LA expansion/conversion expected to reduce annual energy costs by approximately $25 million and brine costs by approximately $5 million 10 Pioneer Acquisition moves Olin up to #3 Producer and
North American Chlorine Capacities 5,000 4,291 Chlorine Capacity (000 short tons) 4,000 3,388 3,000 1,955 2,000 1,852 1,000 810 635 544 470 429 330 204
160 ---Dow Oxy Olin Diaphragm PPG Formosa Membrane Mexic hem GGC Mercury Includes St. Gabriel conversion/expansion, Sunbelt joint venture and Dalhousie shutdown. Presumes Shintech startup during 2008. Oxy includes OxyVinyls. Bayer Shintec h Salt-to-Bleach Westlake
Canexus Various Other Source: CMAI/Olin 11 Enhances Olins Operational and Geographical Platform Plant Locations Location Location Tacoma, WA 26 Becancour, Quebec 29 8 57 Tracy, CA 30 2 35 Niagara Falls, NY 32
53 Henderson, NV 49 55 18 Charleston, TN 60 25 43 Santa Fe Springs, CA 39 Augusta, GA 17 McIntosh, AL54 41 28 44 Chlorine Capacity (-000 Short Tons)
McIntosh, AL 415 Becancour, Quebec (1) 340 Niagara Falls, NY 286 Charleston, TN 248 St. Gabriel, LA (2) 246 McIntosh, AL (50% Sunbelt) 160 Henderson, NV 152 Augusta, GA 108
Total 1,955 38 50 St. Gabriel, LA 59 (1) The Becancour Plant has 275,000 short tons diaphragm and 65,000 short tons membrane capacity (2) The St. Gabriel plant includes the announced 49,000 short tons capacity expansion and conversion to membrane cell Pioneer Chlorine Plants Pioneer Bleach Plants Olin Chlorine & Bleach Plants Source: /Olin 12
ECU Netback* Environment Industry pricing environment has improved through: Net capacity reductions of about 12% since 2000 We expect the tight caustic market to continue which should provide a positive pricing environment into first half of 2009; the result of low chlor alkali industry operating rates due to soft vinyls demand European imports into the East Coast are similar to 2007 levels while West Coast imports from China have increased over 2007 levels, a trend that is expected to continue at a similar rate * ECU Netback = ECU price - freight +/- customer premiums/discounts 13 Olin ECU Netback Outlook 2008 caustic price announcements totaling $720-$745 per ECU are supported by tight caustic supply and are expected to be realized in Q4 and into 2009 Q3 ECU netback of $660 is 12% higher than Q2; we expect sequentially higher netbacks into the 1H 2009 Higher ECU netbacks are driven by caustic pricing offsetting lower chlorine prices and higher freight costs: Q1 Q2 Q3 Q4
Company Dow Dow Formosa Plastics La Roche Oxy Vinyls LP Georgia Pacific Pioneer Atofina St. Anne Chem PPG Oxy (KOH) OXY Olin (KOH) Holtra Chem Holtra Chem Mexichem Cedar Chem Olin Dow Olin Canexus ERCO Reductions Location COMPLETED Ft. Saskatchewan Plaquemine, LA Baton Rouge, LA Gramercy, LA Deer Park, TX
(3 locations) Tacoma, WA Portland, OR Nackawic, NB Lake Charles, LA Taft, LA Delaware City, DE Charleston, TN Orrington, ME Acme, NC Santa Clara, Mex Vicksburg, MS Dalhousie, NB ANNOUNCED Freeport, TX St. Gabriel, LA North Vancouver, BC Port Edwards, WI Reductions Expansions Net Reduction Tech DIA DIA DIA DIA DIA/HG DIA/HG DIA/MB DIA/MB MB
COMPLETED Freeport, TX Lake Charles, LA Geismer, LA Longview, WA Calvert City, KY McIntosh, AL Santa Clara, Mex Various Sites Nackawic, NB Delaware City, DE Hamlet, NC Tampa, FL Plaquemine, LA ANNOUNCED Plaquemine, LA Geismar, LA Fort Pierce, FL Freeport, TX St. Gabriel North Vancouver, BC Port Edwards, WI Tech ECU MB MB MB MB MB
MB MB 2,225,000 246,000 180,000 80,000 5,006,000 Annual caustic demand growth: 0.8% or 110,000 Tons/Year Technology Key: DIA=Diaphragm, HG=Mercury, MB=Membrane, STB=Salt-to-Bleach. 1 Location Dows supply agreement renewal with Shintech is expected to eliminate Shintechs plans for a Chocolate Bayou plant. Source: Olin Data 15 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 Utilizes both chlorine and caustic soda in an ECU ratio Bleach commands a $100 to $200 price premium over ECU selling prices Regional nature of bleach business benefits Olins geographic diversity
Platform for future growth in fastest growing segment 16 Winchester Products Products End Uses Winchester sporting ammunition -- shotshell, small caliber centerfire & rimfire ammunition Hunters & recreational shooters, law enforcement agencies Small caliber military ammunition Infantry and mounted weapons Industrial products -- 8 Maintenance applications in power & concrete gauge loads & powder- industries, powder-actuated tools in construction actuated tool loads industry 17 Winchesters 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 18 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 Long-term contracts with military and law enforcement agencies now account for 25% to 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 Additional Q3 military awards totaled over $20 million 19 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 $200 million Net debt expected to be about zero at year end Pension plan remains 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 20 Pension Plan Actions Contribution of $100 million in May 2007 expected to be final cash requirement for foreseeable future Plan frozen to new hires on 1/1/05, and for salaried and non-bargain hourly employees on 1/1/08 Voluntary and negotiated transitions from pension plan to 401(k) plan leaves two groups of union employees currently accruing benefits in Plan Allocation of Plan assets modified to match investment returns to changes in the valuation of Plan liabilities Plan over-funded position at 12/31/07 has been preserved as of 9/30/08 21 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 an 82 year continuous common dividend with above average yield 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 forwardlooking statements. Some of the factors that could cause actual results to differ are described in the business and outlook sections of Olins Form 10-K for the year ended December 31, 2007 and in Olins Third Quarter 2008 Earnings Release. These reports are filed with the U.S. Securities and Exchange Commission. 23 Appendix Olin Industries Mathieson Chemical Corp. 1892 founded in East Alton, IL providing blasting powder to Midwestern coal mines 1892 founded in Saltville, VA to produce soda ash. 1898 formed Western Cartridge Company to manufacture small arms ammunition
1896 builds first chlor-alkali plant in US 1931 acquires Winchester Repeating Arms 1909 introduces first commercial production of liquefied chlorine 1940s & 1950s acquires cellophane, paper, lumber & powder-actuated tools businesses 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 ordnance (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 24 North American ECU Capacity Iquisa 1.1% Westlake 1.3% Shintech 2.2%
Canexus 1.0% ERCO 0.9% Mexichem 2.5% Bayer 2.8% All Others 2.7% Dow 28.2% Georgia Gulf 3.1% Formosa 5.3% PPG 12.2% 1 Olin (1) Olin production capacity includes Sunbelt &14.0% other joint ventures. Source: CMAI May, 2008 Oxy
22.5% 25 North American Chlorine Demand by End Use Distribution & Other 14% Water Treatment 6% Vinyls 37% Pulp & Paper 1% Inorganics 6% Chlorinated Intermediates 8% Organics 28% Source: CMAI, 2008 Organics includes: Propylene oxide, epichlorohydrin and the phosgene chemicals (MDI, TDI, polycarbonates). Inorganics includes: Titanium dioxide (TiO2) and bromine. 26
North American Caustic Soda Demand by End Use Source: CMAI, 2008 Organics includes: MDI, TDI, polycarbonates, synthetic glycerin, sodium formate, monosodium glutamate (MSG). Inorganics includes: titanium dioxide (TiO2), sodium silicates, sodium cyanide. 27
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