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Net income zooms 28.13% at Westlake in Q3 2012
Nov '12
Mr. Albert Chao
Mr. Albert Chao
Westlake Chemical Corporation reported net income for the three months ended September 30, 2012 of $87.0 million, or $1.30 per diluted share, on sales of $821.2 million. This represents an increase in net income of $19.1 million from the quarter ended September 30, 2011 net income of $67.9 million, or $1.01 per diluted share, on sales of $968.4 million.

Income before income taxes for the third quarter of 2012 was impacted by $17.6 million related to debt refinancing costs ($7.1 million) and unabsorbed manufacturing costs associated with a planned outage of our styrene plant in Lake Charles, Louisiana ($10.5 million).

Net sales for the third quarter of 2012 decreased $147.2 million compared to the third quarter of 2011, mainly attributable to lower sales prices for most of the Company's major products and lower sales volumes for styrene, partially offset by higher polyethylene, ethylene, PVC resin and building products sales volumes. Income from operations was $142.5 million for the third quarter of 2012 as compared to $117.3 million for the third quarter of 2011.

Income from operations for the third quarter of 2012 benefited from improved olefins and vinyls integrated product margins primarily due to lower feedstock and energy costs, higher sales volume for polyethylene and for our major vinyls products and higher operating rates as compared to the third quarter of 2011. Industry ethane prices declined 56.7% and industry propane prices declined 41.8% in the third quarter of 2012 as compared to the third quarter of 2011.

Third quarter 2012 earnings of $87.0 million, or $1.30 per diluted share, on sales of $821.2 million were lower than the second quarter 2012 earnings of $115.5 million, or $1.72 per diluted share, on sales of $914.0 million. Third quarter 2012 income from operations of $142.5 million decreased $28.5 million compared to income from operations in the second quarter of 2012 of $171.0 million.

The decrease in income from operations was due to lower olefins integrated product margins as compared to the second quarter of 2012. Olefins margins for the quarter were impacted by lower sales prices for polyethylene and the impact of high feedstock costs in inventory at the end of the second quarter of 2012, which flowed through cost of sales in the third quarter of 2012 as a result of utilizing the first-in-first-out (FIFO) method of inventory accounting. In addition, the unabsorbed manufacturing costs related to the styrene outage negatively impacted margins in the quarter.

Albert Chao, President and Chief Executive Officer, stated, "We are pleased to report our strongest third quarter in the company's history, driven by strong demand for ethylene derivatives and low feedstock costs. We are continuing to make progress on our previously announced expansions that should grow our bottom line and allow us to capitalize on the low cost ethane feedstock and energy costs that shale gas is providing.

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Westlake Chemical Corporation

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