Earnings Call: Q3 2021

Oct 22, 2021

Good morning, and welcome to Olin Corporation's 3rd Quarter 2021 Earnings Conference Call. All participants will be in a listen only mode. By pressing star then 0. Following today's brief opening comments, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Steve Keenan, Olin's Director of Investor Relations. Please go ahead, Steve. Thank you, Tom. Good morning, everyone, and thank you for joining us today. Before we begin, let me remind you that this discussion, along with the associated slides and the question and answer session that follows, will include statements regarding estimates or expectations of future performance. Please note that these are forward looking statements and that actual results could differ materially from those projected. Some of the factors that could cause actual results to differ from our projections are described without limitations in the Risk Factors section of our most recent Form 10 ks and in the Q3 earnings press release. A copy of today's transcript and slides will be available on our website in the Investor section under past events. Our earnings press release and other financial data and information are available under press releases. With me this morning are Scott Sutton, Olin's CEO Pat Dawson, President, Epoxy Damian Goempel, President, Chlor Alkali Products and Vinyls Brett Feuer, President, Winchester Jim Barlick, Olin's COO and Todd Slater, Olin's CFO. Scott will begin with some brief remarks, after which we will be happy to take your questions. I'll now turn the call over to Scott Sutt. Yes. Thanks, Steve, and hello to everybody. I'm pleased to report the Olin team has once again proved to be the most unique and agile in the industry in meeting the clear expectation of our shareholders. Again, I just have to say that the solid performance by the Complete team sets me up to be able to focus on the items that drive our future, which are enhancing our contrarian value model, turning our ratchet on undervalued products, Harlan to grow accretive capital allocation, building out our InterLink matrix of activation knobs, growing shooting sports participation and lifting all Olin people. This is a company that is focused on continuing to grow adjusted EBITDA and coupling that with balanced capital management to deliver more than $10 of earnings per share in the near future. So I'll make some brief commentary on a few slides and get to the Q and A quickly. 2021 is expected to be a solid result for Olin for the reasons shown on Slide number 3. While the longer term fundamental of demand that grows faster than supply is starting to be exposed here in 2021, Our leading actions to get a higher value for our scarce resources is proving to be successful. Current highlights of that success are that we continue to exit business that was based on non negotiated pricing, align our product chain mix with the intended impact from purposeful settings of our InterLink matrix of activation nodes, start accelerating the value capture of Epichlorohydrin and drive an expansion in shooting sports presentation with our Shoot United movement. While there may be some end of year holiday slowdowns, which are really supply driven, not demand driven, and some seasonality that result in a sequentially flattish 4th quarter result. We still expect 2022 to SEED 2021. The reason thematic for better results in 2022 is shown on Slide number 4. The minor reason in our thematic is that the previously mentioned demand growth versus supply growth dynamic just gets better and better across all our businesses. More people are enjoying shooting sports, demanding clean wind energy and expanding their homesteads. The major reason in our thematic is that all of Olin's activities are designed around a foundational cultural principle of only selling into value. We know who we are. In October, we took the decision to close some more undervalued assets and simultaneously used other existing global asset and product liquidity to grow Olin's value. As our own ECU assets are getting right sized, we are a global buyer of ECUs to satisfy our higher valued products demand. Even though we have grown earnings for 5 consecutive quarters and delivered a levered free cash flow that is approaching 20%. We still must show that our performance will continue to improve. But maybe more importantly, we must demonstrate our ability to manage uncertainty and volatility. Slide number 5 is an illustration. Olin has 3 substantial businesses, each with a meaningful contribution to segment earnings. For reasons that we previously discussed, the Winchester, which is shown in red on the slide, Consumer and Defense Business offers solid and sustainable growth. For reasons we will discuss in just a moment, The epoxy, which is shown in green on the slide, engineered materials offer differentiated growth as we expand margins in that business. The Chlor Alkali Products and Vinyls Industrial Essentials are our largest organic and inorganic growth opportunity. We expect the Chlor alkali segment results to be slightly volatile across a brief transitional window when we have a model profile shift between the relative strengths on the two sides of the ECU. We think of the net company volatility as ripples on a deep ocean, not waves on a shallow lagoon. We Should Control Our Destiny Here. Continuing with the theme of good fundamentals on Slide number 6, Our perceived old world chemistry has new world application and value. I won't read all these megatrend multipliers as I'm Sure, they're familiar to you, but instead jump to Slide number 7 and hit on the differentiated growth profile of epoxy. Epoxy sets itself apart from other engineered materials by offering nearly non substitutable performance. Almost every end use category is growing faster than global GDP. Consider the outlook for more and larger wind turbines Clean Energy. Consider the outlook for electrical laminates for the new mobility trends and broad electrification trends. Consider the outlook for infrastructure expansion and replacement and so on. Even though we recognize value of this business in epoxy resin sales and in epoxy systems sales, The value driver is really epichlorohydrin, and we will be expounding on our globally leading epichlorohydrin position in Future Earnings Calls. We expect it won't be long before our epoxy business delivers greater and $1,000,000,000 of EBITDA and carries the same enterprise value that all of Olin carries today, more representative of a highly engineered materials company. Finally, I will close on Slide number 8. We're going to start talking more about EPS in conjunction with EBITDA and segment earnings. We are advancing in our evolution and expect our activities in debt reduction, refinancing, share repurchases and M and A to be big contributors of forward value, and that value shows in EPS. No doubt that a majority of our forward discussion will center on leadership, our linchpin products, great supply demand fundamentals, parlaying and lifting Olin people. However, new ways to create shareholder returns are evolving for Olin and help us earn above $10 of earnings per share. So that concludes my opening comments and Tom, we're now ready to take questions. Thank you. We will now begin the question and answer session. At this time, we will pause momentarily to assemble our roster. And the first question comes from Hassan Ahmed with Alembic Global. Please go ahead. Good morning, Scott. Hi, Hassan. Scott, wanted to touch on some of these natural gas price escalations that we've seen, not just in the US, but globally as well. So, on the US side of it, if you could sort of talk through how you guys have dealt What was a pretty tricky quarter and continues to be a tricky 4Q in terms of the hikes we've seen in natural gas prices. And if you could also talk about what you guys are seeing in terms of the cost curve impact with natural gas price escalation in Europe and The power curtailments we're seeing in China as well. Yes, I mean, sure. For us, we have a couple strategies to manage the local issue. I mean, one is, we have a pretty strong hedging program where we have Some amount of it hedged out into the future, which helps protect us. The rest of it is absolutely 100% covered in product pricing. And every day, we get more ability to recover that on an instantaneous basis as we get out of some of these contracts that keep us in handcuffs. I think the more important one is maybe your second one. I mean rising global energy cost It's actually a plus for Olin and that's because trade flows get more expensive and trade movements get more volatile and that just fits right into our model of lifting the value of these Olin scarce Resources. Very helpful. And as a follow-up, Scott, obviously now you're guiding to net debt to EBITDA being around one time by the end of the year. And it was very helpful talking about $10 plus in EPS and you touched on sort of share buybacks and M and A and the like as being meaningful contributors. As we look at 2022 with the balance sheet now as clean as it is, How should we be thinking about capital allocation, particularly if you could dig a bit deeper into the thought process with regards to sort of meaningful share buybacks as well as M and A. Yes. I mean, sure. Look, I'll cover one element of it and then Todd will cover most of it, but a good bit of that is going to go toward our grow programs. And I suspect maybe there'll be some other questions through the call, and we're happy to talk about how we go out and grow the company. So that's certainly A part of it Hassane, I mean, Todd, do you want to cover the rest? Yes. You're right, Hassane, as we delevered the balance sheet, That does provide Olin a lot of financial flexibility to accomplish the structuring and parlaying that we've been talking about, Scott just referenced. Going forward, we would expect to target in that 40% range of our levered free cash flow as shareholder rewards. That includes the dividends and opportunistic share buyback as we go forward. Very helpful. Thank you so much, guys. The next question comes from Mike Sison with Wells Fargo. Please go ahead. Hey, good morning guys. Nice, another great quarter. Scott, I'm just curious, it sort of feels like Given how well your results are coming in this year, you're sort of in the 9th inning of your transformation and but you sort of talked about a lot of things that can continue to improve. So Just curious where you think you are in terms of you've only been here a year, it's been a good year. Just what else do you think could be done to continue to improve the company? Yes. Hi, Mike, and thanks. Yes, I mean, look, I would say the team here at Olin has a long runway in front of it. I mean, all we've done so far is put a bit of a disruptive model in place, which is highly complementary to the fact that for the foreseeable future that demand growth actually grows faster than supply growth. There's a lot more to come beyond that. I would say if you think about business by business a little bit, here we are in Winchester about to embark on a Shoot United program to go out and grow the number of people doing sports shooting immensely and Brett will get an We'll continue to talk about that hopefully later in the call. In epoxy, some of the systems and some of the high growth areas like mobility that we provide are starting to take off. Maybe more importantly, We've set ourselves to the point where we're a buyer of ECUs out there and there is global product and asset liquidity available and we're just getting started on that program of accessing that to go out and grow our business. And then, of course, we'll complement that with inorganic acquisitions. So that's sort of how the runway shakes out. Got it. And then as a follow-up, The first half you're a little bit above $500,000,000 in EBITDA, second half you're in the $700,000,000 range. When you think about the volatility or maybe just the kind of the delta between the quarters, is that $500,000,000 to $700,000,000 sort of range that you can keep your EBITDA within and is that sort of the potential for next year as we think about doing better? Well, I think the reason, Mike, that you see those differences is because we're just getting good at practicing our model. And every day, we continue to get more knobs that are under our control, reference some of the remarks we made about getting some of our materials more open and freely negotiated as opposed to being tied to trade indices. So the reason that, that early volatility has been there, it's kind of been a one way volatility there is just because we're getting better and expanding our model. I think When you look out in the future, of course, we're saying that 2022 will be better than 2021. And there may be some time period where we have to shift which side of the ECU sets our market participation Because today, the weak side is still caustic. Got it. Thank you. The next question comes from Alex Yefremov with KeyBanc. Please go ahead. Thank you. Good morning, everyone. Scott, you mentioned epi renegotiations in the slides. Can you provide any details What percent of your merchant business is out for any negotiations, but also maybe size up the merchant epi business as a percent of revenue or 12% of your capacity. Yes. So I think I heard your question. I mean, at least on The chlorine side, we continue to make progress getting that opened up. And we expect at least by 2023 that that's essentially opened up. But we'll have to see how discussions go over the next quarter for us. We haven't really shared Just how big our epi business is in relation to the rest of it because It's not that important, the size of the Epi business. What is important is that it is the linchpin that sets value across our whole epoxy chain. And Olin is focused every day on lifting the value of that Scarish Resource. Pat, would you have anything else to add about epichlorohydrin? Yes, I think the other thing to Keep in mind about EPI is we have a lot of flexibility between the merchant market and our captive production. We have multiple knobs on epi that we can activate to bring more value to that whole Epoxy Value Chain. Okay, understood. Thank you for that. Could you discuss parlaying activity for EDC as well? What is involved year and how would you describe this opportunity? Yes. I mean, Dom, you will make some comments on parlaying of EDC. Just on the broader topic, I would just say we're continuing to be successful developing that program. And If you think about many of our products, chlorine, caustic, bleach, EDC, epoxy and epichlorohydrin, In the Q3, we had success at parlaying activities around all those. Damian, do you want to talk about EDC? Sure. Thanks, Scott. From an EDC standpoint, Olin, we have a large presence in merchant EDC. Of course, we can touch reach customers all over the world with our positions in the U. S. Gulf. And we have expanded our Parley network there as well because we have customer demand now in Europe, Africa, Obviously, India, Southeast Asia, Northeast Asia, Latin America and our ability to complement our own supply with supply that happens to be available at certain opportunistic times in the world just allows us to get bring that product closer to the customer and realize some value there from the ability to help them turn that material into their PVC end used products that's serving the other growing markets. So our ability to get closer to customers with our CarlineWeb network, That is that translates into value for Olin here that we've realized going forward. Thanks a lot. The next question comes from Kevin McCarthy with Vertical Research Partners. Please go ahead. Good morning. Scott, you've talked about an epoxy segment margin goal of 30% in the past. And this morning, I think you threw out $1,000,000,000 as and EBITDA goal for the segment. What do you need to do in that business to get there from here. What are the 2 or 3 sources of incremental improvement recognizing that the business has already come a long way? What additional runway do you see in 2022 and beyond for upside in epoxy? Yes. We just need to keep the activities going that we've already started, but Pat can expand on those a little bit. Yes. Kevin, epoxy, I would say is really epoxy is at the right time at the right place. And what I mean by that is if you look at the megatrends and you look at the demand for epoxy in these different segments, Right place, right time, right? So you look at composites and light weighting. Epoxy enables that. You look at blend, wind systems, Decarbonization, Right Place, Right Time. Electrical Laminates, e Mobility, adhesives that are used in e batteries, epoxy, right place, right time. So I think what you're seeing is We've got the infrastructure in place. We've got the commercial organization in place. And really, we can go across the whole globe around these applications, extracting value where we see value can best be extracted. Kevin, I think we're in a great position to be able to complement what we have already been doing and to keep building value around a lot of these megatrends that play right in the wheelhouse of how epoxy brings value to the market. Okay. So it sounds like it's less strategic and more just, riding the sources of demand improvement that you outlined, Pat. Well, I'd say strategically, make no mistake that epichlorohydrin and the scarcity of epichlorohydrin and the multiple knobs we have there is much more strategic going forward than it has been in the past. And I would say that we even have opportunities in aromatics and what we And then all in acetone and cumene to bring this contrarian model into play. So that could be very strategic to our future as well. Understood. And then secondly, if I may, Scott, I just wanted to ask about Slide 8. This is something you've talked about in the past breaking the cycle pattern. Just was wondering if you could put a finer point on it. I appreciate the analogy you used, The waves on the lagoon ripples on an ocean and so forth. But even specialty chemical companies sometimes suffer down year. If you were to look out over the medium term 3 to 5 years, What would it take to cause a down year in your mind for Olin? Is it a shift from weaker side The stronger side of the ECU or an economic recession or something else that would precipitate cyclical change for the company. Yes. I mean, even just going back to your first question where you had kind of said, are you just riding wave. I mean, I would make no mistake about it. I mean, we're heavily focused on value over volume. And if there's any wave, it's a wave that Olin is creating. So you're exactly right on Slide number 8 there. We're trying to represent that this is no longer a cyclic business. It was a cyclic business because Olin made it a cyclic business and we've completely changed how we're doing business now. This is structural work that is going on. And not only that, there are structural dynamics that have changed in the marketplace. We have a reasonable view out 5 years, right? And every single place we look, demand growth exceeds supply growth. So could there be down quarters? That is not impossible. But I do want to reiterate that If we have to shift which side of the ECU is setting our market participation, That's a relatively short term item that you may or may not see. That is not a year long type of shift. We've taken the business from being a little bit slower to being very nimble to go out and make sure that we do what we need to do to make sure that we get significant value from Olin's The next question comes from Frank Mitsch with Fermium Research. Please go ahead. Thank you and congratulations on another solid quarter. You made an announcement yesterday about shuttering some capacity in Alabama. Could Could you talk about the decisions behind that and where you think this leaves the chlor alkali market in its supply and demand balance? Yes. Thank you, Frank. And we won't comment on the market. The decision was strictly driven by the fact that We're still undervalued there and we're just not going to sell into low value markets. I mean, I can tell you where it leaves Olin's supply demand balance. And that is in a place where we're positioned to go out and IEC use at the right time to support growth in our downstream derivatives and will likely be a smaller participant in and the merchant market going forward, particularly in those places where we're going to be compelled to continue to supply through next year on trade indices that actually don't reflect the market value of the product. Okay, got you. And as I look at Slide 12, the ECU Profitability Contribution Index, That is an investment banker's dream. I mean, it's just an absolute hockey stick. Where do you see that going in 4Q and in 2022. Well, every day we're focused on listing value, and that is the one measurement that ties everybody in the company together. So we're focused on continuing to move it up. Again, I want to reiterate that there may be a quarter or 2 where we have to draw a flat spot in it to make sure we're positioned right to continue to lift Olin's value. But yes, we'll continue to move it up. I mean, Damian, In your businesses, what do you think about 4th quarter here? Yes, sure. I mean, we certainly can see a continuation of the trend where the chlorine side remains relatively stronger and of course as Scott mentioned, contracts have converted away and we highlighted On our first slide, we shifted more contracts away from index to really negotiated. There is a step up in value there that we're So we continue to see that momentum play through as chlorine remains strong. The rest of the chlorine portfolio in my division and to complement PathPoint on the epoxy side continues to we continue to achieve value. And of course, you all guess the caustic side has improved. There's certainly some increasing areas of tightness and we spoke about the energy issues that are disrupting those trade flows. And so we're seeing constant move up as well. But net net, the ECU continue to move up as reflected in the PCI and we expect that to continue. But chlorine certainly continues to drive the stronger side of the model. Terrific. Thank you so much. The next question comes from Jeff Zekauskas with JPMorgan. Please go ahead. Thanks very much. I was looking at your cost of goods sold, which I think was 1,680,000,000 and in the second quarter it was $1,710,000,000 Why did cost of goods sold go down sequentially? I would have thought your raw materials would have been higher. Did you simply ship lower volume? Is that the effect or Can you explain that? Yes. Hey, Jeff. Yes, sure. I mean, look, at least in one of our businesses, We had some amount of lower volumes. If you remember, at the end of the third quarter, hurricanes, other logistics issues and so forth, slowed down volumes a bit there. So That's probably the main driver Todd that about Ryan. Yes, no, that's absolutely the case. I mean, we commented in the deck, you did see chlor alkali products and vinyls volume was down sequentially, really that was a result of the other big result was of Ibad. So that's why You saw lower cost of goods sold. Great. And then in your I guess in your 3rd slide, you said you shifted another 10% of merchant chlorine to freely negotiated. And now less than 1 third of volume remains under index. So if all of that The remaining volume that was under index is now at some market contract. What's the annual economic effect of that? Jeff, I would just Say without trying to itemize product by product that the impact of getting more of our merchant Thanks, Corie. Out from index is important. The more important part is that it lifts our whole portfolio of pouring derivatives. Now if we were to get the remaining third out from under index, it would have a fair economic impact to Olin. But I'll just say we don't expect to hold on to that complete 1 third of volume that remains under index because some of those customer segments aren't going to be receiving chlorine from Olin because we're stuck with having to supply for 1 more year at some value that isn't representative of the market. So we'll lose some of that volume. Thank you. Okay. Thank you very much. Sure. The next question comes from Josh Silverstein with Wolfe Research. Please go ahead. Good. Thanks. Good morning, guys. Just wanted to go back to the capital allocation discussion from before. Obviously, this year was a big year for debt reduction. Can you just talk about maybe the capacity for buybacks next year? What you're thinking about for a minimum amount of cash on hand versus debt reduction and then what could be left over for potential M and A versus buybacks? Yes. I mean, Todd will expand on this a little bit. I mean, what I would say to set the stage for his explanation is that right now buying back stock represents an immediate return of about 20%. So you can expect this to be a significant part of our forward program. Todd? That's right. Really, if you think about 2021. Our first priority has really been to pay down debt, and we're targeting $1,100,000,000 of debt reduction this year. So far, it's about $850,000,000 through the 1st three quarters. We've taken a lot of that high cost debt out of our system now, And we will plan to reduce debt further here in the Q4. So that will get us down to the about one times range. Ultimately, we're probably targeting gross debt in the $2,500,000,000 range. To answer part of your question, Josh, where we're really targeting gross debt is in that 2.5% range. And as we said earlier, we're going to focus on our financial flexibility to enable us to do structuring activities, which would include M and A as well as parlaying. And we're targeting 40%, right in that 40% range of our levered free cash flow towards shareholder rewards, including the dividend and buybacks. That's helpful. And then just on the $2,500,000,000 EBITDA level, I mean, this was previously suggested it could be done in a few years from now. Is that the new floor to think of? And where do you think given the portfolio and asset base right now, what could that new number be to the upside? Well, I mean, we'll keep working to move EBITDA. I mean, this year, we'll get Pretty close to that, pretty obvious, I think. Next year, we've absolutely said that we'll lift EBITDA over this year. We're evolving to also setting targets based around EPS. And so we have a fairly short term goal of $10 a share and we'll look at where we go from there. The next question comes from John Roberts with UBS. Please go ahead. Thank you. It seems like the Dow contract It's still one of the largest opportunities going forward. Does that contract all open up at once or does it open up in phases over time? And if it's the latter, could you talk about how far out the longest part of that contract goes? Well, I won't give too many specifics on arrangements with a particular supplier customer. But what I will say because it's in the public domain already and it is a material item Is that our major ECU supply that we're doing at cost ends in 2025. And so there'll be options and each and every option will be cash accretive to Olin. Okay. And then Hassan earlier, specifically, we have a strong production And again, a lot of the Chinese caustic, do they have any Yes. I'm sorry, I missed the question. It just went quiet. I don't know whether it's on your end or our end. Anybody still there? Hey, Tom, can you hear us? Yes, I can hear you. Would you like to go to the next question? Yes, for some reason, we just lost it. Yes, it sounds like his phone line disconnected. All right. The next question comes from Arun Viswanathan with RBC. Please go ahead. Great. Thanks for taking my question. Congrats on the continued strong results here. So just wanted to ask on your comments that 'twenty two will be better than 'twenty one. Your Slide 13 has positive price momentum and across all of your businesses pretty much. So assuming that continues, just Given your comments that you continue to focus on value, do you expect each of the segments to show higher EBITDA or how should we think about that comment in the context of the segments? Thanks. Yes. No, I think that's fair. Each and every segment should show better results in 2022 relative to 2021. Great, thanks. And then just another question on the cost curve. You obviously moved up the values here on the ECU. How much of your capacity would you say is still kind of not up to your standards on value. And is there anything that you could do to change that? I mean, is there any debottlenecking? I know you have the 100,000,000 productivity, but anything that you'd focus on to think about changing that situation? And again, how much of your capacity would you say is still maybe could be ready for shutdown? Thanks. Yes. I mean, when you think about if you think about it from a capacity standpoint, I would just start out in 2025, right? Clearly, 30% of our capacity gets 0 return today. So that's certainly a big chunk. If you take that out, we still have some work to do. It's not necessarily cost issue, though. I mean, I think our manufacturing and supply chain teams have done just a great job driving productivity and flexibility in our assets. It's more still a market value issue. And while a lot of our derivatives are starting to get to the point of reinvestment economics, If you look at what we sell into the merchant market, so take the ECU, elemental chlorine at caustic. They go into the merchant market. There's still some work to do there to lift those up to a point that we get somewhere close to reinvestment economics. Thanks. Sure. The next question comes from Eric Petrie with Citi. Please go ahead. Thank you and good morning, Scott. Hey, Eric. We closed roughly 850,000 tons of ECU capacity this year. Just a question on strategy. Do you expect to parlay in the close one amount or how do you see that going forward? Yes. I think let me Dami will answer this question. Sure. I mean, from a part of the standpoint, we still see that It's about pulling that volume that's out there is liquidity that's out in the market. We believe there's still pools of that available globally that we didn't leverage. Of course, as these trade flows do become disrupted, as costs impact other areas, we're going to capitalized on that with our cost position. But we also see as we look at these megatrends and the demand that is clearly growing across, that's fully our ECUs and derivatives. Parlay ECUs are going to play a bigger and bigger role in our ability to bring those ECUs into our system, allow us to be more flexible with how we derivatize Our chlorine across areas like epoxy, across our vinyl space, across our intermediate organics and even back to the elemental chlorine. So we have opportunities here to flex our own merchant chlorine and derivative that and pull other ECUs into the system as well, all for the purpose of lifting and enhancing the value of the ECUs into the customers that we serve. Helpful. And then on the 1 third of volume in chlorine that remains under index, how much of that is related to TiO2 end market? And How does that change at the end of next year? Well, I mean, look, I would just say part of it is goes into TI-two and that's some part of the market. We're not going to be serving out in 2023. And so part of the volumes That go down are related to this shutdown that we just announced in McIntosh, Alabama. Thank you. The next question comes from Steve Byrne with Bank of America Merrill Lynch. Please go ahead. Yes, thank you. You have this slide that illustrates the relative value between chlorine and caustic and I appreciate the concept of your business is so complex, it's clear that that chlorine value is not A data point on here, but likely a very wide range. EPI, for example, Perhaps a year ago might have been at the bottom end of that range in value to you of chlorine. Is it fair to say that it is Now among the highest value end markets for chlorine for you, the reason I ask is, Is it getting to the point where you think there's risk of capacity expansions of epi in the market either competitors or customers back integrating. Yes, thanks. I mean, look, yes, a lot of chlorine and chlorine derivatives have moved up. I would say we have a long way to move FE because it's certainly not at the high end of that range today. Could it move up to a point where it supports reinvestment economics. It's certainly not impossible. Do we expect to see expansions out in the future, whether it's in Epi or even on the ECU side of the business. Yes, We expect to see some things get announced because otherwise the world's not going to have enough of those scarce products. Once those expansions are announced, I keep in mind that there's still likely a 4 year gap where demand continues to grow faster than supply. So the only way that changes if there is is if there are just multiple announcements of multiple expansions that continue over the next 10 years. And then when we look at pricing on some of these Chlorine derivatives like PVC versus EDC, the both of them have ripped, but you got about Maybe a $0.60 a pound difference between them. Is that fair to you that downstream PVC See, it garners that much of a margin versus EDC or is that compelling to you to want to move in that direction? Well, I mean, we're of course the largest merchant supplier of EDC and that's a material that we've moved up in value. I think the recent movements of PVC, so I'm going back maybe across a 6 to 9 month window. It went up, looked like there were some risk of it coming down, where by the way, we had a number of activations around EDC to make sure that at least Olin's portfolio did not go down. Then you saw PBC move back up. I would just say that I think we have some room there. Clearly, the fundamentals for PVC look good longer term and there's a margin lift that PBC gets over at EDC and I think we're positioned to take advantage of that. Thank you. Sure. The next question comes from Matthew Blair with Tudor, Pickering, Holt. Please go ahead. Hey, good morning and congrats on the great results. I wanted to circle back to capital So based on your 2022 EBITDA guidance, it seems like you should be able to generate at least $1,600,000,000 of free cash flow next year. And you mentioned 40% to shareholders, that would be about $600,000,000 That remaining $1,000,000,000 should we think of that as Dry powder for M and A, either like transformational M and A or bolt on M and A because it seems like a pretty significant amount. Yes, I mean, you look, your numbers certainly aren't that far off. So I mean, you're exactly right. I mean, we'll have the options for that. Part of it is in acquisitions. Part of it is also to support our parlaying activities where we go out and use global product and asset liquidity because we will have some needs for various logistics capabilities as we do that. That's really low capital. It's very light touch in terms of capital, But I just wanted to complete the picture. Sounds good. And then previously, Yes, I think it's hard to either sell or spin Winchester, just due to either like valuation or taxes or maybe a mixable. In today's environment, it seems like ESG is just a bigger part of the picture. So has anything changed? And I guess, could you just provide an update of how you see Winchester fitting in the portfolio over the long term? Yes. Well, I mean, this is a great business for us. It still has a lot of legs. And I'm going to ask Fred to Speak here in just a moment about our Schuh United movement. But if you were to break the business down just a little bit. You've got 55000000 to 60000000 people doing sport Now and it's the fastest growing youth sport really in the country now. So and now we've got this program that we're about rollout to go out and increase the pie. Brett, do you want to talk about Shoot United? Yes. And just to add a little bit to what Scott said, The 60,000,000 people that participate now really participate for the main reasons to be with family and friends. The addressable market is over 200,000,000 people of all demographic and ages. What Shoot United is a sophisticated communication strategy to introduce all those fun facts and great things about the recreational shooting sports to those 200 +1000000 people. Okay. Thank you. The next question comes from Roger Spitz with Bank of America. Please go ahead. Thanks very much. Following yesterday's announcement, How much diaphragm capacity do you have left in short ton ECUs? Yes, yes. I mean, we probably won't quote an exact number, but what I will say is Almost half of our capacity used to be diaphragm based and with that announcement, we've totally taken out about 800 85,000 something like that ECU tons. So we took out a good chunk of it, but we still have a lot. Okay. And can you comment on chlorine value and volumes into bleach? Is it starting to fall versus other derivatives as we move out of the pandemic or is people still reaching all services they can touch? This is Anghyad. Let me take that question and thanks for it. Clearly, we have seen bleach values move up and in concert with the broad movement across the EU. Bleach is also A scarce product, the largest merchant leach producer, we clearly have seen the dynamics play out. Chlorine and ECU values have moved up in bleach, but clearly much more room as bleach is used into disinfectants and wastewater treatment areas continues to grow and be more valued than needed. And so we're We're still poised to with a long runway in front of us to capture value for this specialty product in United States and properties into great markets. Thank you very much. Thanks. The next question comes from Mike Leithead with Barclays. Please go ahead. Great. Thanks. Good morning, guys. I guess just first on the you touched on inorganic or acquisition opportunities. Can you maybe just flush out what you're looking for there? Just help us with either in terms of size or are you looking for geographic or new products expansion. Just give us a sense of kind of what you're going after there? Yes, sure. I mean, if I had to sum it up, I would say we're looking for assets that really complement our model. So I mean that opens up a lot of possibilities. You could imagine that we're able to acquire ECU capability, although that may not be necessarily North American focus. There's A lot of opportunity for us to expand into other geographies. Another complement to our model would be derivatives, just like we have a chlorinated organics derivative chain and we have and epoxy chain and we go part of the way down vinyls. There's other chains that certainly feed off elemental chlorine and those would be great complements to our model whereby We did a lot more knobs to turn across our matrix and get value back to ton 1 that we have today. The other thing I would say, it's also not impossible that we discover that some of those things that have a direct complement to our model that actually our commercial attitude might apply to other businesses as well that we might acquire. So we're thinking about all of those possibilities. That's great. And then maybe just for a follow on, just digging into the epoxy strategy a bit, if I look at Slide 7, There's a lot of talk or discussion around engineered solutions. Is it fair to say that you're trying to kind of ultimately sell less of I would argue more commodity liquid epoxies and try to push it more downstream into kind of hardeners, epoxy dispersions, things like that. If you could just flush out kind of where the strategy is for epoxy that would be great. Yes, Mike, this is Pat. And when you look at the epoxy value chain, We make money across that whole chain and it's very interlinked as to how we make our money there. With our epichlorohydrin, like I say, we have multiple knobs on how we monetize that epi, whether it's selling it to the merchant market. If we get value there or we back out of the merchant market and we take that EPI and convert it more to liquid epoxy resin to monetize it or we can take that liquid epoxy resin and further convert it to a solid epoxy resin or other converted resins Or we can take that liquid epoxy resin and systematize it into things like wind systems or formulated products or blends. Mike, we need that strategically, we need that whole chain to be able to have the maximum value over volume choices. That's really what we've been doing and we'll continue to do in the future. Great. Thanks. As there are no further questions, this concludes our question and answer session. I would now like to turn the conference back over to Scott Sutton for any closing remarks. No, I would just say thanks a lot, everybody, for joining today. Appreciate it.