Westlake reports a substantial increase in its operating income
Westlake Chemical Corporation reported net income of $47.3 million, or $0.72 per diluted share, for the second quarter of 2008. This represents an increase from the second quarter of 2007 net income of $37.9 million, or $0.58 per diluted share. Sales for the second quarter of 2008 were $1,106.4 million and income from operations for the second quarter of 2008 was $73.6 million.
This compares with net sales of $782.7 million and income from operations of $62.3 million in the second quarter 2007. The increase in sales was primarily due to higher selling prices and volumes for most major products. Income from operations increased in the second quarter as compared to the second quarter of 2007 as higher polyethylene and styrene selling prices outpaced higher feedstock, natural gas and electricity costs.
In addition, the second quarter of 2007 was adversely impacted by a major turnaround lasting approximately 30 days at one of the ethylene units in Lake Charles, Louisiana. These increases in second quarter 2008 operating income were partially offset by continued weakness in the construction markets, which negatively impacted Vinyls segment margins. Vinyls margins were lower in the second quarter of 2008 as compared to the prior year period as PVC pipe selling prices declined slightly in spite of higher feedstock costs.
PVC resin and caustic selling prices and PVC resin and pipe sales volumes, however, were higher in the second quarter of 2008 as compared to the second quarter of 2007. The second quarter of 2008 was negatively impacted by trading losses of $7.0 million as compared to a $4.1 million gain reported in the second quarter of 2007. The second quarter 2008 net income benefited from the reversal of $2.7 million of tax reserves due to tax settlements, which reduced income tax expense for the period.
Second quarter 2008 net income increased $41.9 million, or $0.64 per diluted share, from the $5.4 million net income, or $0.08 per diluted share, reported in the first quarter of 2008. Second quarter 2008 income from operations increased $59.7 million from the $13.9 million reported in the first quarter of 2008, while net sales increased by $191.3 million from the $915.1 million reported in the first quarter of 2008.
The increase in sales was largely due to higher selling prices for polyethylene, styrene, PVC resin and caustic and higher sales volumes for all major products.
PVC pipe sales volumes increased substantially in the second quarter as compared to the first quarter as construction activities picked up after an extended winter. Styrene sales volume returned to more normal levels after the styrene facility in Lake Charles, Louisiana underwent a major maintenance turnaround and revamp project during the first quarter designed to increase energy efficiency and boost capacity.
Income from operations increased in the second quarter of 2008 as compared to the first quarter of 2008 as selling price increases outpaced higher feedstock and energy costs. The first quarter of 2008 was negatively impacted by the turnaround of the styrene plant in Lake Charles and the closure of the Pawling, New York window and door component manufacturing facility.