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Olin to Take $700 Million Goodwill Impairment Charges in Q3

Zacks Equity Research
·3 min read

Olin Corporation OLN recently stated that its third-quarter 2020 financial results are expected to include non-cash pretax impairment charge of around $700 million related to goodwill. The charge is mainly due to the persistently lower stock price of the company during 2020. The decline in its market capitalization has led to adjustments in the fair value of the company’s reporting segments.

Further, the goodwill impairment charge includes around $145 million related to the Epoxy segment as well as around $555 million related to the Chlor Alkali Products and Vinyls segment. The company stated that these charges reflect the best-case estimates. However, the actual impairment amounts are being evaluated and could change.

Notably, the impairment charges will not result in any current or future cash expenditures. Also, the charges do not have any effect on Olin's compliance with the covenants and restrictions related to its outstanding credit agreements.

Shares of Olin have lost 16.9% over a year against the industry’s rise of 9.7%.

In August, Olin stated that Chlor Alkali Products & Vinyls and Epoxy units continue to face challenges amid the current economic conditions and visibility around future demand remains limited.  

The company also expects the U.S. Army Lake City contract to increase Winchester's annual revenues by $450-$550 million. Moreover, it anticipates commercial ammunition demand to continue to increase through the balance of 2020.

Zacks Rank & Key Picks

Olin currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Brenntag AG BNTGY, Comstock Mining, Inc. LODE and Yamana Gold Inc. AUY, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Brenntag has an expected earnings growth rate of 2.9% for 2020. The company’s shares have surged 34.3% in the past year.

Comstock Mining has an expected earnings growth rate of 370% for 2020. Its shares have returned 128.5% in the past year.

Yamana has an expected earnings growth rate of 84.6% for 2020. The company’s shares have gained 88.1% in the past year.

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Yamana Gold Inc. (AUY) : Free Stock Analysis Report
 
Olin Corporation (OLN) : Free Stock Analysis Report
 
Comstock Mining, Inc. (LODE) : Free Stock Analysis Report
 
Brenntag AG (BNTGY) : Free Stock Analysis Report
 
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Zacks Investment Research