Olin Corporation is the manufacturer of two major segments: Color Alkali products is a major market participant within North America. Headquartered in Clayton, MO, Olin has multiple manufacturing facilities with the United States and one location in Canada. Color Alkali Olin is the third largest producer of Color Alkali products and the largest producer of industrial bleach in North America according to data from Chemical Market Associates, Inc.. Chlorine and caustic soda are the co-products Olin produces in fixed ratios called Electrochemical Units (CEO) through the electrolysis of salt.
Both chlorine and caustic soda are used in the production of bleach. A complete list of end- products can be found on page 30 of the appendix. Competitive environment Color Alkali industry is a commodity business with product differentiation largely based on price. Manufacturing is very capital intensive, which does create some financial barriers to entry. The two largest manufacturers, Dodecahedral and Scheme use most of their products to manufacture other downstream products. Olin differentiates itself from competitors by focusing the merchant market.
Sales and growth This is a cyclical industry. This cyclical arises because supply is limited by the physical capacity of manufacturing facilities and ability to sell the co-product. Given these are commodity products, prices are very responsive to changes in supply and demand. Timing capacity growth with the cycle leads to a growth in sales. Demand for end-products ultimately drives demand for Color Alkali. The energy advantage North America has by using natural gas instead of crude oil has grown exports of end-products. Customers Most of sales are to the merchant market.
The company is able to capture a greater hare of the merchant chlorine market than its overall share of the market capacity because it focuses on the merchant market instead of using the products in downstream production. Costs and Suppliers Almost 50% of production costs is raw materials. The two major needs are electricity and salt. Electricity comes from coal, hydroelectric, natural gas and nuclear power. Regulatory Olin must comply with legislation regarding the environment, such as air, water and land quality, which requires capital expenditures and increases operation costs.
The company has programs in place to minimize waste and prevent pollution. Legislation as passed in October 2009 surrounding the use of mercury cell technology, but expired without enactment. This would have increased the costs of operating mercury cell capacity, of which Olin has one facility. Since it is uncertain whether something similar will happen in the future, Olin chose to convert its mercury cell capacity now, that lead to a restructuring charge incurred in 2010. Winchester Olin has held Winchester for 80 years. Winchester is “the premier developer and manufacturer of small caliber ammunition”.
Production is located in East Alton, IL, but new plans were announced in 2010 to move this operation to Oxford, MS. This would be the most modern production facility in North America and reduce operating costs by $30 million. Competitive environment The ammunition industry creates branded consumer products. Factors contributing to product differentiation include performance, product innovation and brand name, making it one of the three largest commercial ammunition manufactures in the United States, along with Lillian Tachometers and Remington Arms Company.
Sales and growth Winchester has been able to drive sales by being a retail brand of choice and an industry innovator. Recently, the company has developed reduced-lead and non-lead reduces. Sales are seasonal with an increase in sales during the fall hunting season. Several five-year contracts provide stability in future sales going forward. Currently, Winchester does have a backlog of $178. 1 million which is down from the previous year. Customers Customers include retailers, law enforcement agencies, and militaries.
Winchester has developed strong relationships with industrial customers, mass merchants, wholesalers and specialty sporting goods retailers. The company also holds several contracts with the U. S. Government, accounting for 5% of sales in 2010. Costs and Suppliers The raw materials needed include copper, ammunition cartridge case cups, and lead, purchased from vendors at the market price plus a conversion charge. Propellant, the other raw material needed, is purchased mostly from one large U. S. Supplier.
