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Westlake Chemical volume improves in first quarter

05
May '09
Westlake Chemical Corporation reported a net loss of $6.1 million, or $0.09 per diluted share, for the first quarter of 2009. This represents a decrease from the first quarter of 2008 net income of $5.4 million, or $0.08 per diluted share. Sales for the first quarter of 2009 were $488.3 million and loss from operations for the first quarter of 2009 was $0.9 million. This compares with net sales of $915.1 million and income from operations of $13.9 million for the first quarter of 2008.

The decrease in sales was primarily due to significantly lower selling prices for all of the Company's major products with the exception of caustic, after the global collapse in commodity prices that occurred in the fourth quarter of 2008. In addition, sales volumes were lower in the first quarter of 2009 as compared to the first quarter of 2008 largely due to lower overall demand.

The first quarter of 2009 loss from operations and net loss reflected lower sales volumes, weakness in the vinyls construction markets, reduced demand for polyethylene, an unscheduled outage caused by an ice storm at our Calvert City facility and a turnaround at one of our ethylene units in Lake Charles, Louisiana. In January 2009, the Calvert City, Kentucky complex experienced an ice storm that caused a power failure at the facility and resulted in damage to a compressor in an ethylene unit. The shutdown of the complex and associated damage resulted in reduced production rates for all major products at the facility.

The ethylene unit in Lake Charles was idled during December 2008 due to significant customer de-stocking and resulting weakened demand. A maintenance turnaround for this unit, which was scheduled for later during 2009, was brought forward and performed during this downtime. The unit was shut down for a total of 71 days during the first quarter of 2009. The maintenance turnaround was completed and the unit resumed production in March. The Calvert City outage and Lake Charles turnaround resulted in repair costs and the expensing of unabsorbed fixed manufacturing costs of approximately $19.5 million in the first quarter of 2009.

First quarter 2009 net loss of $6.1 million, or $0.09 per diluted share, was an improvement from the $109.6 million net loss, or $1.67 per diluted share, in the fourth quarter of 2008. First quarter 2009 loss from operations of $0.9 million also compared favorably to the loss from operations of $165.8 million in the fourth quarter of 2008, while first quarter 2009 net sales decreased by $108.8 million from the $597.1 million reported in the fourth quarter of 2008. The decrease in sales was primarily due to lower average selling prices for all of the company's major products in the first quarter of 2009 as compared to the fourth quarter of 2008.

These decreases were partially offset by higher sales volumes for polyethylene, PVC resin and PVC pipe. The first quarter net loss was negatively impacted by lower operating rates resulting from the outages at the Calvert City facility and the Lake Charles ethylene unit. The fourth quarter of 2008 net loss was negatively impacted by approximately $168.0 million (pre-tax) due to inventory losses and the expensing of unabsorbed fixed manufacturing costs related to a drop in product prices and operating rates, as a result of the global recession.


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