Olin Corp: All Fired Up

May 23, 2007
Basic-materials company has a long history of fine-tuning its businesses.

When ammunition is one of your main products, making sure targets are in sight seems second nature.

For Olin Corp., which is comprised of three divisions -- Olin Brass, Winchester ammunition (both headquartered in East Alton, Ill.) and Cleveland, Tenn.-based Chlor Alkali products -- the targets are core competency and financial performance.

First-quarter 2007 earnings prove the company isn't misfiring.

Indeed, sales for the first quarter were $765.7 million compared with $725.1 million in first-quarter 2006. The Winchester division's first-quarter earnings were $8.1 million -- double the first quarter of 2006.

"Winchester had a record earnings in the first quarter, driven by a combination of improved volumes and pricing, which more than offset the negative impact of higher commodity costs, primarily lead," said Joseph D. Rupp, chairman, president and CEO of Olin, in an April 30 conference call.

The first iteration of Olin Corp. -- one of IndustryWeek's 50 Best Manufacturing Companies in 2007 -- began in 1892 with Franklin Olin. The company name was Equitable Powder Co. and it supplied blasting powder to coal fields. The company expanded into small arms ammunition, and Western Cartridge Co. was formed in 1898. In 1931 Western purchased Winchester Repeating Arms Co., which was manufacturing ammunition as well as roller skates and refrigerators.

Here is where business savvy paid off.

According to the company Web site, Olin "ended Winchester's disastrous foray into the hardware field, paring it down to its core competencies in arms and ammunition."

For the next 60 years Olin Corp. expanded its product lines via acquisitions and expansions. And once again, the company needed to reassess its targets -- this time in the shadow of the 1990s recession.

"The recessionary environment, coupled with fierce and growing foreign competition, revealed that Olin was spread too thinly across too many businesses and product lines," according to the Web site.

In 1998 the company announced it would spin off its specialty chemicals businesses as a separately traded company called Arch Chemicals.

Olin Corp. is now a leading producer of copper alloys (serving automotive, electronics, electrical and communications industries as well as the U.S. Mint, U.S. Department of Defense and sporting ammunition manufacturers), chlorine and caustic soda (serving bleach, textiles, pulp and paper, water and wastewater treatment, food processing and chemical manufacturing firms), as well as ammunition.

Olin Corp.
At A Glance

Olin Corp.
Clayton, Mo.
Primary Industry: Chemicals
Number of Employees: 5,800
2006 In Review
Revenue: $3.15 billion
Profit Margin: 4.74%
Sales Turnover: 1.92
Inventory Turnover: 10.73
Revenue Growth: 33.68%
Return On Assets: 17.22%
Return On Equity: 35.09%

The company also is continuing on its path of fine-tuning and expanding its business.

In fact, the company recently announced its plans to acquire Pioneer Companies Inc., a producer of chlor-alkali products.

"The combination of Olin's and Pioneer's businesses creates a chlor-alkali producer with outstanding capabilities to serve the needs of customers across North America," said Rupp in a May 21 press release. "This is a desirable business that we know very well. Our ability to meaningfully add value through synergies and best practices will benefit our shareholders. The combined companies will have a more diversified geographic footprint, a complementary bleach and HCL product mix and a broader distribution network."

Olin management believes that the acquisition will result in at least $35 million of annual cost savings and will be immediately accretive to Olin's earnings per share. Cost savings will be obtained through the optimization of logistics, purchasing, manufacturing costs, and overhead. The acquisition is expected to be completed in the second half of 2007.

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