Olin Reports 2Q

Rising prices for caustic soda continued to lift Olin OLN in the second quarter. There have been five separate caustic soda price increases announced in North America year to date, as the effects of tight supplies have more than offset any weakness in demand. This short supply situation is stemming from a combination of unplanned plant outages and an overall reduction in domestic chlor-alkali operating rates, as demand for caustic soda's coproduct--chlorine--has slumped in the face of sagging end markets, most notably in PVC. Olin expects the current pricing momentum to continue to drive results into 2009. While we don't question the near-term strength of the caustic soda business, we believe that current conditions hardly warrant a reassessment of our long-term outlook for this market--which will inevitably come back into balance in the medium term--and we are maintaining our fair value estimate.