Olin Reports 2Q

On July 26, Olin OLN reported second-quarter results that were in sync with our long-term operating projections. We are maintaining our fair value estimate. Sales came in roughly flat against the prior-year period, with price hikes in the metals segment more than offsetting the negative effects of lower metals volumes and weaker prices in the chlor-alkali segment. Excluding one-time gains, operating profits in the metals segment doubled on a year-over-year basis, thanks to higher prices and lower costs stemming from restructuring actions taken in 2006. Chlor-alkali operating income fell nearly 18% to $55 million, as freight costs rose by 24% versus the second quarter of 2006. Overall, operating income grew by 4.2%, and the firm's operating margin remained essentially flat at 6.4%. Against the backdrop of soaring rail freight rates, Olin's pending acquisition of Pioneer PONR is looking increasingly attractive. The companies' complementary geographies should allow for a substantial reduction in shipping distances, and provide some relief from climbing freight costs.