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Westlake Chemical registers turnraound in Q2 earnings

Aug '09
Westlake Chemical Corporation reported net income of $16.9 million, or $0.26 per diluted share, on net sales of $574.9 million for the second quarter of 2009. Second quarter 2009 net income increased $23.0 million from the $6.1 million net loss, or $0.09 loss per diluted share, reported in the first quarter of 2009.

Second quarter 2009 income from operations was $36.2 million as compared to the $0.9 million loss reported in the first quarter of 2009, while net sales increased by $86.6 million from the $488.3 million reported in the first quarter of 2009. The increase in sales was largely due to higher sales volumes for all of the Company's major products except styrene and higher sales prices for all of the Company's major products except caustic.

The increase in income from operations in the second quarter of 2009 as compared to the first quarter of 2009 was due primarily to sales price and volume increases, which were partially offset by higher feedstock costs. In addition, trading activity resulted in a gain of $9.8 million in the second quarter of 2009 as compared to a gain of $2.5 million in the first quarter of 2009.

The first quarter of 2009 was negatively impacted by an unscheduled outage caused by an ice storm at the Calvert City, Kentucky complex and a turnaround at one of our ethylene units in Lake Charles, Louisiana. The Calvert City outage and Lake Charles turnaround resulted in repair costs and the expensing of unabsorbed fixed manufacturing costs of $19.5 million during the first quarter of 2009.

Albert Chao, President and Chief Executive Officer, said, "We are pleased to report an improvement in earnings in the second quarter of 2009, as compared to the first quarter, despite the recessionary environment. Gas-based ethylene producers, such as Westlake, continue to benefit from a cost advantage over naphtha-based producers, which has benefited our Olefins segment.

Although economic conditions in the construction markets remain weak, the Vinyls segment experienced higher seasonal sales volumes and improved operating rates, but margins remain under pressure. As we continue to manage our business in the current recessionary environment, we have implemented cost reduction programs, temporarily idled some capacity and have reduced discretionary capital spending to preserve cash. In addition, we currently have $317.0 million in cash including restricted cash, and no outstanding borrowings on a revolving credit agreement."

Net income for the three months ended June 30, 2009 of $16.9 million, or $0.26 per diluted share, decreased $30.4 million compared to net income of $47.3 million, or $0.72 per diluted share, for same period last year. Sales for the three months ended June 30, 2009 of $574.9 million decreased $531.5 million compared to sales of $1,106.4 million in the same period last year. The decrease was primarily due to lower sales prices for all major products, and lower sales volumes for all major products except caustic and styrene.

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