Olin Shares Slide On Chemical Margin Worry

ERNEST SCHEYDER

NEW YORK (AP) — Shares of Olin Corp. dropped Tuesday after an analyst encouraged investors to sell the company's stock, citing worry about chemical margins.

The stock fell 97 cents, or 6.6 percent, to $13.81 in midday trading. Shares have traded between $8.97 and $30.39 in the past 52 weeks.

The Clayton, Mo.-based company makes various chemicals, and sells ammunition under the iconic Winchester brand.

While margins for sodium hydroxide — Olin's main product — jumped in 2007 and 2008 due to falling demand and supply shortages, they are now falling "rapidly" due to market weakness and Chinese imports, said UBS Investment Research analyst Don Carson.

Sodium hydroxide is a base for products like paint stripper, drain cleaner and soap. It is also known as caustic soda or lye.

Carson initiated coverage of Olin with a "Sell" rating and $12 price target, implying he expects the stock to slip 19 percent from Monday's $14.78 close.

"The (sodium hydroxide) industry is past its peak and heading into trough-like conditions in 2009-2010," he said in a note to clients.

However, Carson did note Olin has been able to improve its financial position by cutting debt and preserving cash. The company likely will be able to cover its $60 million annual dividend payout, which currently stands at 20 cents per share, he said.

A company representative was not immediately available for comment.