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Westlake Announces Record Second Quarter 2014 Income From Operations

August 5, 2014

- Record quarterly income from operations of $266.8 million, increasing 13% from second quarter 2013.

HOUSTON, Aug. 5, 2014 /PRNewswire/ — Westlake Chemical Corporation (NYSE: WLK) today reported net income for the second quarter of 2014 was $169.4 million, or $1.26 per diluted share, on net sales of $998.6 million. This represents an increase in net income of $23.6 million, or $0.17 per diluted share, compared to the quarter ended June 30, 2013 net income of $145.8 million, or $1.09 per diluted share, on net sales of $939.0 million. Net sales for the second quarter of 2014 increased by $59.6 million compared to net sales for the second quarter of 2013, mainly attributable to higher sales prices for most of our major Olefins products and higher sales volumes for polyethylene, styrene and caustic soda, partially offset by lower sales volumes for PVC resin and ethylene co-products due to the first quarter 2014 Calvert City, Kentucky complex plan maintenance turnaround and the ethylene plant conversion from propane to ethane feedstock both of which extended into the second quarter of 2014, respectively. Income from operations was $266.8 million for the second quarter of 2014 as compared to $235.2 million for the second quarter of 2013. Income from operations for the second quarter of 2014 benefited primarily from improved olefins integrated product margins, as higher sales prices more than offset the increase in feedstock and energy costs, and higher olefins sales volumes. The second quarter 2014 income from operations was negatively impacted by higher cost inventory that was produced from propane feedstock in the first quarter of 2014 that flowed through cost of sales in the second quarter, costs associated with the first quarter 2014 maintenance turnaround and other activities at our Calvert City complex that carried over into the second quarter of 2014 and lower PVC resin sales volume in the second quarter of 2014 as compared to the second quarter of 2013. In addition, the second quarter of 2014 was negatively impacted by an unplanned outage at one of our ethylene units in Lake Charles, Louisiana.

Second quarter 2014 net income of $169.4 million, or $1.26 per diluted share, increased by $11.4 million from the $158.0 million, or $1.18 per diluted share, reported in the first quarter of 2014. Net sales in the second quarter of 2014 were $998.6 million compared to sales of $1,027.7 million in the first quarter of 2014, a decrease of $29.1 million. The decrease in sales was largely the result of lower sales volumes for polyethylene, ethylene co-products and PVC resin, partially offset by higher selling prices for polyethylene and PVC resin. Second quarter 2014 income from operations of $266.8 million increased $18.7 million from first quarter of 2014 income from operations of $248.1 million primarily due to the negative impact in the first quarter 2014 of the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnaround at our Calvert City complex and our Calvert City ethylene plant’s feedstock conversion and expansion project. Income from operations in the second quarter of 2014 was negatively impacted by higher cost inventory produced from propane feedstock, costs associated with the Calvert City maintenance turnaround, lower PVC resin sales volume and an unplanned outage at one of our Lake Charles ethylene units.

For the six months ended June 30, 2014, net income was $327.5 million, or $2.44 per diluted share, on net sales of $2,026.3 million. This represents an increase in net income of $58.3 million, or $0.43 per diluted share, from the six months ended June 30, 2013 net income of $269.2 million, or $2.01 per diluted share, on net sales of $1,803.7 million. Net sales for the six months ended June 30, 2014 increased by $222.6 million compared to the prior year period mainly due to higher sales prices and sales volumes for most of our major Olefins products and sales contributed by our specialty PVC pipe business, which we acquired in May 2013, partially offset by lower ethylene co-products, PVC resin and styrene sales volumes. Income from operations was $514.8 million for the six months ended June 30, 2014 as compared to $429.3 million for the six months ended June 30, 2013, an increase primarily attributable to improved olefins integrated product margins and higher olefins volumes. The increase in income from operations for the six months ended June 30, 2014 was partially offset by lost production and related costs resulting from the planned downtime associated with the maintenance turnaround and project work at our Calvert City complex during the first quarter of 2014.

Albert Chao, President and Chief Executive Officer, said, “Our second quarter results reflect record quarterly income from operations. We continue to benefit from low cost, ethane-based ethylene production that is the result of North American shale oil and gas production, as well as from the increased ethylene capacity from our recent ethylene expansion projects. During the quarter we announced two strategic initiatives. We completed the acquisition of German-based Vinnolit Holdings GmbH and its subsidiaries on July 31, which allows us to expand our chlor-vinyl business globally and adds important specialty PVC products to our product portfolio. In addition, on August 4, we completed the initial public offering of Westlake Chemical Partners, LP, a master limited partnership (MLP). We believe the MLP creates value for our shareholders and provides a platform for future growth.”

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $319.9 million for the second quarter of 2014 increased $44.6 million compared to $275.3 million in the second quarter of 2013. EBITDA for the second quarter of 2014 increased $23.4 million compared to EBITDA of $296.5 million in the first quarter of 2014. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Net cash provided by operating activities was $432.2 million in the first six months of 2014. Capital expenditures for the first six months of 2014 were $216.9 million. As of June 30, 2014 we had cash of $876.1 million and our long-term debt was $763.9 million.

OLEFINS SEGMENT

The Olefins segment reported income from operations of $238.7 million in the second quarter of 2014, an increase of $51.0 million compared to $187.7 million reported in the second quarter of 2013. This increase was mainly attributable to higher olefins integrated product margins in the second quarter of 2014 as compared to the prior year period, as the increase in sales prices outpaced increases in feedstock and energy costs. In addition, second quarter 2014 income from operations benefited from higher polyethylene and styrene sales volumes as compared to the second quarter of 2013.

The Olefins segment reported income from operations of $238.7 million for the second quarter of 2014, a decrease of $33.6 million from the $272.3 million reported in the first quarter of 2014. The decrease in operating income was primarily due to lower sales volumes for polyethylene and lower ethylene production resulting from the unplanned outage at one of our ethylene units in Lake Charles, partially offset by higher polyethylene sales price.

The Olefins segment reported income from operations of $511.0 million for the six months ended June 30, 2014 as compared to income from operations of $348.7 million for the six months ended June 30, 2013, an increase of $162.3 million. This increase was mainly attributable to improved olefins integrated product margins primarily as a result of the increased ethylene production at our Lake Charles complex after the first quarter 2013 completion of the Petro 2 ethylene unit expansion and its conversion to 100% ethane feedstock capability. In addition, olefins integrated product margins for the six months ended June 30, 2014 benefited from an increase in sales prices that outpaced increases in feedstock and energy costs as compared to the prior year period. Further, income from operations for the six months ended June 30, 2014 benefited from higher sales volumes for most of our major products and improved production rates as compared to the prior year period. Income from operations for the six months ended June 30, 2013 was negatively impacted by the lost production, unabsorbed fixed manufacturing costs and other costs associated with the turnaround and expansion of the Lake Charles Petro 2 ethylene unit.

VINYLS SEGMENT

The Vinyls segment reported income from operations of $38.1 million in the second quarter of 2014 compared to income from operations of $52.9 million in the second quarter of 2013, a decrease of $14.8 million. The second quarter 2014 income from operations was negatively impacted by higher cost inventory that was produced from propane feedstock in the first quarter of 2014 that flowed through cost of sales in the second quarter of 2014 and costs associated with the first quarter 2014 maintenance turnaround and other activities at our Calvert City complex that carried over into the second quarter of 2014. In addition, second quarter 2014 income from operations was negatively impacted by lower PVC resin sales volumes primarily caused by lost production resulting from the first quarter 2014 maintenance turnaround activities at our Calvert City complex that extended into the second quarter of 2014.

The Vinyls segment reported income from operations of $38.1 million in the second quarter of 2014, an increase of $59.2 million compared to an operating loss of $21.1 million in the first quarter of 2014. The increase in operating income in the second quarter was primarily the result of the negative impact in the first quarter of 2014 of the lost sales and production and related costs associated with the maintenance turnaround at our Calvert City complex. In addition, the second quarter of 2014 benefited from higher PVC prices and continued ramp up of production of our Geismar, Louisiana chlor-alkali plant. This was partially offset by lower sales volumes for PVC resin and higher cost inventory produced from propane feedstock that flowed through cost of sales in the second quarter of 2014.

The Vinyls segment reported income from operations of $17.0 million for the six month ended June 30, 2014 as compared to income from operations of $96.6 million for the six months ended June 30, 2013, a decrease of $79.6 million. This decrease was primarily driven by the lost sales, lower production rates and the expensing of $20.4 million related to unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnaround at our Calvert City complex and our Calvert City ethylene plant’s feedstock conversion and expansion project. In addition, income from operations for the six months ended June 30, 2014 was negatively impacted by lower PVC resin sales volumes, lower caustic sales prices, the severe winter weather experienced in early 2014 and prior to the completion of the Calvert City ethylene plant’s feedstock conversion project, lower vinyls integrated product margins attributable to significantly higher propane costs.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as statements regarding cost advantages related to North American shale gas production are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: general economic and business conditions; the cyclical nature of the chemical industry; availability, cost and volatility of raw materials and utilities, including natural gas from shale production; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions, including environmental regulation; political unrest; industry production capacity and operating rates; the supply/demand balance for Westlake’s products; competitive products and pricing pressures; access to capital markets; technological developments; the effect and results of litigation and settlements of litigation; operating interruptions; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Westlake’s Annual Report on Form 10-K for the year ended December 31, 2013, which was filed with the SEC in February 2014.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation’s second quarter 2014 results will be held Tuesday, August 5, 2014 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). To access the conference call, dial (866) 825-3209, or (617) 213-8061 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 91937382.

A replay of the conference call will be available beginning four hours after its conclusion until 11:59 p.m. Eastern Time on Tuesday, August 12, 2014. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 62091806

The conference call will also be available via webcast at: http://edge.media-server.com/m/p/tmgweget/lan/en and the earnings release can be obtained via the company’s web page at: http://www.westlake.com/fw/main/IR_Home_Page-123.html.


                                                  WESTLAKE CHEMICAL CORPORATION

                                              CONSOLIDATED STATEMENTS OF OPERATIONS

                                                           (Unaudited)

                            Three Months Ended June 30,                      Six Months Ended June 30,
                            ---------------------------                      -------------------------

                               2014                       2013                        2014                    2013
                               ----                       ----                        ----                    ----

                                        (In thousands of dollars, except per share data)

    Net sales                            $998,576                                $939,047                          $2,026,252 $1,803,694

    Cost of sales           692,605                    665,560                   1,433,271               1,302,398
                            -------                    -------                   ---------               ---------

    Gross profit            305,971                    273,487                     592,981                 501,296

    Selling, general and
     administrative
     expenses                39,183                     38,260                      78,138                  72,014
                             ------                     ------                      ------                  ------

    Income from
     operations             266,788                    235,227                     514,843                 429,282

    Interest expense        (9,539)                   (5,343)                   (18,696)               (11,624)

    Other income
     (expense), net           4,601                       (95)                      7,110                   3,424
                              -----                        ---                       -----                   -----

    Income before income
     taxes                  261,850                    229,789                     503,257                 421,082

    Provision for income
     taxes                   92,407                     83,973                     175,782                 151,919
                             ------                     ------                     -------                 -------

    Net income                           $169,443                                $145,816                            $327,475   $269,163
                                         ========                                ========                            ========   ========

    Earnings per share: (1)

    Basic                                   $1.27                                   $1.09                               $2.45      $2.01

    Diluted                                 $1.26                                   $1.09                               $2.44      $2.01
                                            =====                                   =====                               =====      =====

_____________

    (1)               On February 14, 2014, our Board
                      of Directors authorized a two-
                      for-one split of our common
                      stock. Stockholders of record as
                      of February 28, 2014 were
                      entitled to one additional share
                      for every share outstanding,
                      which was distributed on March
                      18, 2014. Per share data for the
                      three and six months ended June
                      30, 2013 have been restated to
                      reflect the effect of the stock
                      split.


                                             WESTLAKE CHEMICAL CORPORATION

                                              CONSOLIDATED BALANCE SHEETS

                                                      (Unaudited)

                                                                      June 30,                   December 31,
                                                                           2014                           2013
                                                                           ----                           ----

                                                                            (In thousands of dollars)

    ASSETS

    Current assets

    Cash and cash equivalents                                                         $876,067                   $461,301

    Marketable securities                                                     -                       239,388

    Accounts receivable, net                                            454,281                        428,457

    Inventories                                                         437,519                        471,879

    Other current assets                                                 54,636                         48,057
                                                                         ------                         ------

    Total current assets                                              1,822,503                      1,649,082

    Property, plant and equipment, net                                2,217,049                      2,088,014

    Other assets, net                                                   329,817                        323,813
                                                                        -------                        -------

    Total assets                                                                    $4,369,369                 $4,060,909
                                                                                    ==========                 ==========

    LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities (accounts payable and
     accrued liabilities)                                                             $386,929                   $404,858

    Long-term debt                                                      763,938                        763,879

    Other liabilities                                                   490,429                        473,569

    Total liabilities                                                 1,641,296                      1,642,306

    Stockholders' equity                                              2,728,073                      2,418,603
                                                                      ---------                      ---------

    Total liabilities and stockholders' equity                                      $4,369,369                 $4,060,909
                                                                                    ==========                 ==========


                                     WESTLAKE CHEMICAL CORPORATION

                                 CONSOLIDATED STATEMENTS OF CASH FLOWS

                                              (Unaudited)

                                                     Six Months Ended June 30,
                                                     -------------------------

                                                           2014                      2013
                                                           ----                      ----

                                                        (In thousands of dollars)

    Cash flows from operating
     activities

    Net income                                                      $327,475              $269,163

    Adjustments to reconcile net
     income to net cash provided by
     operating activities:

    Depreciation and
     amortization                                        94,474                    75,566

    Deferred income
     taxes                                               19,359                    60,425

    Other balance sheet
     changes                                            (9,066)                (149,674)
                                                         ------                  --------

    Net cash provided by
     operating
     activities                                         432,242                   255,480

    Cash flows from investing
     activities

    Acquisition of
     business                                                 -                (178,309)

    Additions to equity
     investments                                              -                  (6,113)

    Additions to
     property, plant and
     equipment                                        (216,912)                (297,873)

    Construction of
     assets pending
     sale-leaseback                                           -                    (136)

    Proceeds from
     disposition of
     assets                                                  13                        62

    Proceeds from
     repayment of loan
     to affiliate                                             -                      167

    Proceeds from sales
     and maturities of
     securities                                         342,045                   209,785

    Purchase of
     securities                                       (117,332)                (114,881)

    Settlements of
     derivative
     instruments                                          (290)                  (1,588)
                                                           ----                    ------

    Net cash provided by
     (used for)
     investing
     activities                                           7,524                 (388,886)

    Cash flows from financing
     activities

    Dividends paid                                     (33,623)                 (25,120)

    Proceeds from
     exercise of stock
     options                                              4,187                     2,656

    Repurchase of common
     stock for treasury                                       -                 (13,283)

    Windfall tax
     benefits from
     share-based
     payment
     arrangements                                         4,436                     4,576
                                                          -----                     -----

    Net cash used for
     financing
     activities                                        (25,000)                 (31,171)

    Net increase
     (decrease) in cash
     and cash
     equivalents                                        414,766                 (164,577)

    Cash and cash
     equivalents at
     beginning of period                                461,301                   790,078
                                                        -------                   -------

    Cash and cash
     equivalents at end
     of period                                                      $876,067              $625,501
                                                                    ========              ========


                                                         WESTLAKE CHEMICAL CORPORATION

                                                              SEGMENT INFORMATION

                                                                  (Unaudited)

                                  Three Months Ended June 30,                     Six Months Ended June 30,
                                  ---------------------------                     -------------------------

                                      2014                      2013                       2014                    2013
                                      ----                      ----                       ----                    ----

                                                         (In thousands of dollars)

    Net external sales

    Olefins                                    $699,053                               $623,341                          $1,421,851 $1,206,186

    Vinyls                         299,523                   315,706                    604,401                 597,508
                                   -------                   -------                    -------                 -------

                                               $998,576                               $939,047                          $2,026,252 $1,803,694
                                               ========                               ========                          ========== ==========

    Income (loss) from operations

    Olefins                                    $238,657                               $187,661                            $510,990   $348,719

    Vinyls                          38,129                    52,906                     17,015                  96,569

    Corporate and other            (9,998)                  (5,340)                  (13,162)               (16,006)
                                    ------                    ------                    -------                 -------

                                               $266,788                               $235,227                            $514,843   $429,282
                                               ========                               ========                            ========   ========

    Depreciation and amortization

    Olefins                                     $26,721                                $26,554                             $53,368    $49,900

    Vinyls                          21,623                    13,534                     40,791                  25,418

    Corporate and other                158                       122                        315                     248
                                       ---                       ---                        ---                     ---

                                                $48,502                                $40,210                             $94,474    $75,566
                                                =======                                =======                             =======    =======

    Other income (expense), net

    Olefins                                      $1,199                                 $1,151                              $2,653     $5,161

    Vinyls                           (213)                    (520)                     (247)                  (945)

    Corporate and other              3,615                     (726)                     4,704                   (792)
                                     -----                      ----                      -----                    ----

                                                 $4,601                                  $(95)                             $7,110     $3,424
                                                 ======                                   ====                              ======     ======


                                                         WESTLAKE CHEMICAL CORPORATION

                                             RECONCILIATION OF EBITDA TO NET INCOME AND TO NET CASH

                                                        PROVIDED BY OPERATING ACTIVITIES

                                                            (Unaudited)

                      Three Months               Three Months Ended                                     Six Months Ended
                          Ended                       June 30,                                              June 30,
                       March 31,
                       ---------

                              2014             2014                         2013                      2014                    2013
                              ----             ----                         ----                      ----                    ----

                                              (In thousands of dollars)

    EBITDA                         $296,536                            $319,891                                $275,342            $616,427 $508,272

    Less:

    Provision for
     income taxes           83,375           92,407                       83,973                   175,782                 151,919

    Interest expense         9,157            9,539                        5,343                    18,696                  11,624

    Depreciation and
     amortization           45,972           48,502                       40,210                    94,474                  75,566
                            ------           ------                       ------                    ------                  ------

    Net income             158,032          169,443                      145,816                   327,475                 269,163

    Changes in
     operating assets
     and liabilities        46,198           39,210                     (37,547)                   85,408                (74,108)

    Deferred income
     taxes                   8,275           11,084                       30,959                    19,359                  60,425
                             -----           ------                       ------                    ------                  ------

    Net cash provided
     by operating
     activities                    $212,505                            $219,737                                $139,228            $432,242 $255,480
                                   ========                            ========                                ========            ======== ========


                                 WESTLAKE CHEMICAL CORPORATION

                                   SUPPLEMENTAL INFORMATION

                 Product Sales Price and Volume Variance by Operating Segments

            Second Quarter 2014 vs.               Second Quarter 2014 vs.
               Second Quarter 2013                First Quarter 2014
               -------------------                ------------------

              Average                     Volume               Average         Volume

            Sales Price                                      Sales Price
            -----------                                      -----------

    Olefins       +7.4%                              +4.8%                       +1.1% -4.4%

    Vinyls        +1.0%                              -6.2%                       +4.7% -6.8%

    Company       +5.2%                              +1.1%                       +2.2% -5.1%

                                                                Average Quarterly Industry Prices (1)

                                      Quarter Ended
                                      -------------

                      June 30,                      September 30,                                     December 31,        March 31,        June 30,
                                 2013                                     2013                                       2013             2014            2014
                                 ----                                     ----                                       ----             ----            ----

    Ethane (cents/lb)             9.2                                      8.4                                        8.8             11.4             9.8

    Propane (cents/
     lb)                         21.6                                     24.4                                       28.4             30.8            25.2

    Ethylene (cents/
     lb) (2)                     58.5                                     54.3                                       52.3             55.1            55.5

    Polyethylene
     (cents/lb) (3)             100.0                                    101.7                                      105.0            107.7           109.0

    Styrene (cents/
     lb) (4)                     81.8                                     83.2                                       81.8             86.9            82.2

    Caustic soda
     ($/short ton)
     (5)                       625.8                                    605.8                                      582.5            579.2           595.0

    Chlorine ($/short
     ton) (6)                   255.0                                    248.3                                      245.0            236.7           232.5

    PVC (cents/lb)
     (7)                        62.2                                     61.5                                       60.5             66.5            69.5

________________

              (1)    Industry pricing data was obtained
                      from IHS Chemical. We have not
                      independently verified the data.

              (2)    Represents average North American
                      spot prices of ethylene over the
                      period as reported by IHS
                      Chemical.

              (3)    Represents average North American
                      contract prices of polyethylene
                      low density film over the period
                      as reported by IHS Chemical.

              (4)    Represents average North American
                      contract prices of styrene over
                      the period as reported by IHS
                      Chemical.

              (5)    Represents average North American
                      undiscounted contract prices of
                      caustic soda over the period as
                      reported by IHS Chemical.

              (6)    Represents average North American
                      contract prices of chlorine (into
                      chemicals) over the period as
                      reported by IHS Chemical.

              (7)    Represents average North American
                      contract prices of PVC over the
                      period as reported by IHS
                      Chemical.

SOURCE Westlake Chemical Corporation


Source: PR Newswire



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