OLIN Corp. 10-Q Summary: Q1 2026
Business Context and Reporting Period
This report covers the quarterly period ended March 31, 2026. Olin Corporation is a vertically integrated global manufacturer of chemical products (Chlor Alkali Products and Vinyls, Epoxy) and a leading U.S. manufacturer of ammunition (Winchester). The company operates as a large accelerated filer.
Key Financial Metrics
| Metric ($ millions) | Q1 2026 | Q1 2025 |
|---|---|---|
| Sales | 1,583.0 | 1,644.2 |
| Gross Margin | 75.8 | 148.7 |
| Operating (Loss) Income | (78.3) | 43.7 |
| Net (Loss) Income | (83.0) | 1.2 |
| Diluted EPS | (0.73) | 0.01 |
| Operating Cash Flow | (48.6) | (86.0) |
| Free Cash Flow | (92.3) | (147.4) |
| Total Debt | 2,996.1 | 3,035.8 |
| Cash and Equivalents | 192.2 | 174.0 |
Note: Free Cash Flow calculated as Operating Cash Flow less Capital Expenditures ($43.7M).
Material Changes vs. Prior Period
- Revenue Decline: Sales decreased 4% to $1,583.0 million, driven by an 18% drop in the Chlor Alkali segment due to lower volumes and pricing. This was partially offset by a 21% increase in Winchester sales ($470.5M) and a 7% increase in Epoxy sales ($355.6M).
- Profitability Collapse: The company reported a net loss of $83.0 million compared to a net income of $1.2 million in Q1 2025. Gross margin percentage fell from 9% to 5%.
- Segment Performance:
- Chlor Alkali: Reported a segment loss of $44.5 million (vs. $78.3M income), impacted by a $36.1 million legacy litigation charge, higher raw material costs, and lower pricing.
- Winchester: Segment income declined to $15.2 million (vs. $22.8M) due to higher commodity metal and propellant costs, despite strong military project revenue.
- Epoxy: Improved to a loss of $2.9 million (vs. $28.4M loss) due to lower operating costs and higher volumes.
- Legal Settlements: Selling and administrative expenses rose $44.0 million, primarily due to $37.2 million in legal settlement expenses, including the aforementioned legacy litigation charge.
Guidance, Outlook, and Risks
- Outlook: Management expects Q2 2026 operating results to be higher than Q1 2026, citing seasonally stronger demand and improved pricing in Chemical businesses and improved demand in Winchester.
- 2026 Estimates:
- Capital spending: ~$200 million.
- Depreciation and amortization: ~$475 million.
- Environmental expenses: $25 million to $35 million.
- Effective tax rate: 20% to 30% range.
- Cash taxes: Net refund of $20 million to net payment of $20 million (factoring in Inflation Reduction Act credits).
- Liquidity and Debt: On February 19, 2026, Olin amended its Senior Secured Credit Facility to modify financial covenants to be less restrictive. The company has $1,039.6 million in undrawn commitments on its revolving facility. However, credit ratings were downgraded by Fitch (to BB+), Moody's (to Ba2), and S&P (to BB) in February 2026, all with negative outlooks.
- Contingencies: The company expects to pay approximately $195 million to Shintech in the first half of 2026 related to a VCM supply agreement dispute. A new lawsuit was filed by the State of Texas regarding emissions at the Freeport, TX facility.
Investor Verification Checklist
- Shintech Litigation Payment: Verify the timing and impact of the expected $195 million cash outflow to Shintech in H1 2026.
- Credit Covenant Compliance: Monitor the company's ability to maintain the newly modified financial covenants given the recent credit rating downgrades and operating losses.
- Chlor Alkali Margin Recovery: Assess whether the segment can recover from the $36.1 million litigation charge and persistent pricing/volume headwinds.
- Winchester Cost Inflation: Track the impact of tariff-driven inflation on copper, steel, and tungsten costs on the Winchester segment's margins.
- Environmental Reserves: Review the adequacy of the $157.8 million environmental reserve given the expectation of $25M-$35M in expenses for 2026.