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Westlake Olefins segment income rise in Q4 2007

19 Feb '08

3 min read

The increase in income from operations was partially offset by continued weakness in the Vinyls segment and its downstream businesses, which were impacted by the slowdown in the construction market. Margins in the vinyls segment weakened primarily due to rising feedstock costs and the inability to raise prices sufficiently to cover these cost increases.

Fourth quarter 2007 results were favorably impacted by the utilization of the first-in, first-out (FIFO) inventory accounting method as compared with utilizing the last-in, first-out (LIFO) method used by some companies in the industry. This was due primarily to rising feedstock costs.

Fourth quarter 2007 net income decreased $19.5 million, or $0.30 per diluted share, from the $38.3 million net income, or $0.59 per diluted share, reported in the third quarter of 2007. Fourth quarter income from operations decreased $39.8 million from the $59.8 million reported in the third quarter of 2007, while net sales increased by $10.4 million from the $840.2 million reported in the third quarter of 2007.

The increase in sales was primarily due to higher selling prices for polyethylene, PVC resin and caustic which were partially offset by lower sales volumes for PVC resin and pipe. Income from operations declined in the fourth quarter primarily due to sharp increases in ethane and propane feedstock costs.

Price increases for both polyethylene and PVC resin were not sufficient to offset these higher costs. In addition, seasonal slowdowns compounded the continued weakness in the Vinyls segment.

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