Westlake Chemical Corporation Announces Record Second Quarter 2015 Net Income

- Record quarterly net income of $205.1 million, or $1.54 per diluted share

- Record quarterly Vinyls segment income from operations

Aug 04, 2015, 07:00 ET from Westlake Chemical Corporation

HOUSTON, Aug. 4, 2015 /PRNewswire/ -- Westlake Chemical Corporation (NYSE: WLK) today reported record net income for the second quarter of 2015 of $205.1 million, or $1.54 per diluted share, on net sales of $1,185.0 million. This represents an increase in net income attributable to Westlake Chemical Corporation of $35.7 million, or $0.28 per diluted share, compared to the quarter ended June 30, 2014 net income of $169.4 million, or $1.26 per diluted share, on net sales of $998.6 million. Net income for the second quarter of 2015 included a net pre-tax gain of $15.5 million, or $0.13 per diluted share, related to a gain from the acquisition of a controlling interest in Suzhou Huasu Plastics Co., Ltd. ("Huasu"), a Chinese PVC joint venture, and an impairment loss related to an equity investment. The gain from the acquisition was non-taxable and resulted in the lowering of our effective tax rate for the second quarter of 2015 from approximately 34.3% to 31.9%. Net sales for the second quarter of 2015 increased by $186.4 million compared to net sales for the second quarter of 2014, mainly attributable to sales contributed by Vinnolit, our specialty PVC resin business, which we acquired in July 2014, and higher sales volumes for most of our major products, partially offset by lower sales prices for all our major products. Income from operations was $295.4 million for the second quarter of 2015 as compared to $266.8 million for the second quarter of 2014. Income from operations for the second quarter of 2015 benefited from improved vinyls integrated product margins as a result of lower feedstock costs, increased production at our Calvert City, Kentucky facility following the completion of the ethylene expansion project, higher production rates at our Geismar, Louisiana chlor-alkali plant, and the contribution from Vinnolit as compared to the second quarter of 2014. However, this benefit was partially offset by lower olefins integrated product margins as a result of lower sales prices in the second quarter of 2015 as compared to the prior-year period, and costs related to several maintenance turnarounds completed during the second quarter of 2015.

Second quarter 2015 net income of $205.1 million, or $1.54 per diluted share, increased by $58.8 million from the $146.3 million, or $1.10 per diluted share, reported in the first quarter of 2015. Net income for the second quarter of 2015 included the net pre-tax gain of $15.5 million, or $0.13 per diluted share, resulting from the acquisition of Huasu, and the equity investment impairment. Net sales in the second quarter of 2015 were $1,185.0 million compared to sales of $1,103.5 million in the first quarter of 2015, an increase of $81.5 million. The increase in sales was largely due to higher sales prices for polyethylene and PVC and higher sales volumes for most of our major products. Second quarter 2015 income from operations of $295.4 million increased $66.1 million from the first quarter 2015 income from operations of $229.3 million. The increase was due to lower feedstock and energy costs, higher vinyls operating rates, higher polyethylene sales volumes, and higher PVC selling prices as compared to the prior quarter.

For the six months ended June 30, 2015, net income was $351.4 million, or $2.64 per diluted share, on net sales of $2,288.5 million. This represents an increase in net income of $23.9 million, or $0.20 per diluted share, from the six months ended June 30, 2014 net income of $327.5 million, or $2.44 per diluted share, on net sales of $2,026.3 million. Net income for the six months ended June 30, 2015 included the net pre-tax gain of $15.5 million, or $0.13 per diluted share, from the acquisition of Huasu, and the equity investment impairment. Net sales for the six months ended June 30, 2015 increased by $262.2 million compared to the prior-year period primarily due to sales contributed by Vinnolit, higher sales volumes for ethylene, PVC resin and caustic soda, partially offset by lower sales prices for all our major products. Income from operations was $524.7 million for the six months ended June 30, 2015 as compared to $514.8 million for the six months ended June 30, 2014, an increase mainly attributable to improved vinyls integrated product margins, primarily as a result of lower feedstock costs, increased production at our Calvert City facility following the completion of the ethylene expansion project, improved production rates at our Geismar chlor-alkali plant, and the contribution from Vinnolit, partially offset by lower olefins integrated product margins as a result of lower sales prices as compared to the prior-year period. Sales prices in the first six months of 2015 were negatively impacted by the significant decline in crude oil prices.

"We are pleased to report record second quarter results which benefited from our investments over the past several years to further expand our ethylene and chlorine product integration, and from our acquisitions of Vinnolit and North American Specialty Pipe which broaden our market reach into specialty PVC resin and pipe. We continue to benefit from our access to natural-gas based feedstocks, positioning us as a low-cost producer, and from strong demand for our end-products," said Albert Chao, President and Chief Executive Officer.

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $377.8 million for the second quarter of 2015 increased $57.9 million compared to $319.9 million in the second quarter of 2014. EBITDA for the second quarter of 2015 increased $80.8 million compared to EBITDA of $297.0 million in the first quarter of 2015. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Net cash provided by operating activities was $435.4 million in the first six months of 2015. Capital expenditures for the first six months of 2015 were $203.9 million. As of June 30, 2015, we had cash of $1,026.6 million and our long-term debt was $764.1 million.

OLEFINS SEGMENT

The Olefins segment reported income from operations of $220.9 million in the second quarter of 2015, a decrease of $17.8 million compared to $238.7 million reported in the second quarter of 2014. This decrease was mainly attributable to lower olefins integrated product margins as a result of lower sales prices and from costs related to several polyethylene maintenance turnarounds completed during the second quarter of 2015, partially offset by higher polyethylene sales volumes and lower feedstock and energy costs in the second quarter of 2015 as compared to the prior-year period.

The Olefins segment reported income from operations of $220.9 million for the second quarter of 2015, an increase of $29.8 million from the $191.1 million reported in the first quarter of 2015. The increase in operating income was largely due to higher sales volumes for polyethylene and lower energy costs, partially offset by costs related to the polyethylene maintenance turnarounds completed in the quarter.

The Olefins segment reported income from operations of $412.0 million for the six months ended June 30, 2015 as compared to income from operations of $511.0 million for the six months ended June 30, 2014, a decrease of $99.0 million. This decrease was mainly attributable to lower olefins integrated product margins primarily as a result of lower sales prices, partially offset by higher ethylene and polyethylene sales volume and lower feedstock and energy costs for the six months ended June 30, 2015 as compared to the prior-year period.

VINYLS SEGMENT

The Vinyls segment reported income from operations of $88.0 million in the second quarter of 2015 compared to income from operations of $38.1 million in the second quarter of 2014, an increase of $49.9 million. This increase was primarily driven by higher vinyls integrated product margins in the second quarter of 2015 as compared to the prior-year period mainly as a result of lower feedstock costs and increased ethylene production at our Calvert City facility following the completion of the ethylene expansion project. In addition, second quarter 2015 income from operations benefited from higher caustic soda sales volume attributable to higher production rates at our Geismar chlor-alkali plant and the contribution from Vinnolit as compared to the second quarter of 2014, partially offset by lower sales prices for our major products and costs and reduced volume in Europe related to a maintenance turnaround and ethylene shortage. Income from operations for the three months ended June 30, 2014 was negatively impacted by lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnaround and ethylene expansion project at our Calvert City facilities and significantly higher propane costs.

The Vinyls segment reported income from operations of $88.0 million in the second quarter of 2015, an increase of $40.9 million compared to an operating income of $47.1 million in the first quarter of 2015. The increase in operating income in the second quarter was mainly the result of higher operating rates and higher integrated vinyls margins as a result of higher PVC selling prices and lower feedstock costs as compared to the prior quarter. In addition, the first quarter 2015 income from operations was negatively impacted by lost sales, lower production rates and costs associated with the maintenance turnaround at our Geismar facility.

The Vinyls segment reported income from operations of $135.1 million for the six month ended June 30, 2015 as compared to income from operations of $17.0 million for the six months ended June 30, 2014, an increase of $118.1 million. This increase was primarily driven by higher vinyls integrated product margins for the six months ended June 30, 2015 mainly as a result of lower feedstock costs, increased production rates at our Calvert City facility following the ethylene expansion project, higher caustic soda sales volume primarily attributable to higher production rates at our Geismar chlor-alkali plant and the contribution from Vinnolit, as compared to the prior-year period. The increase in income from operations for the six months ended June 30, 2015 was partially offset by lost sales, lower production rates and costs associated with the maintenance turnaround at our Geismar facility and lower sales prices for our major products. Income from operations for the six months ended June 30, 2014 was negatively impacted by lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the maintenance turnaround and ethylene expansion project at our Calvert City facilities and significantly higher propane costs.

 

The statements in this release and the related teleconference relating to matters that are not historical facts, such as statements regarding cost advantages related to North American natural gas based feedstocks and demand for our end-products are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: general economic and business conditions; the cyclical nature of the chemical industry; availability, cost and volatility of raw materials and utilities, including natural gas from shale production; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions, including environmental regulation; political unrest; industry production capacity and operating rates; the supply/demand balance for Westlake's products; competitive products and pricing pressures; access to capital markets; technological developments; the effect and results of litigation and settlements of litigation; operating interruptions; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Westlake's Annual Report on Form 10-K for the year ended December 31, 2014, which was filed with the SEC in February 2015.

 

Use of Non-GAAP Financial Measures

This release makes reference to certain non-GAAP financial measures, such as EBITDA, as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended. We report our financial results in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), but believe that certain non-GAAP financial measures, such as EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of the company's ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with U.S. GAAP. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release.

 

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's second quarter 2015 results will be held Tuesday, August 4, 2015 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). To access the conference call, dial (855) 760-8160, or (704) 288-0624 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 82598901.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Tuesday, August 11, 2015. To hear a replay, dial (855) 859-2056, or (404) 537-3406 for international callers. The replay passcode is 82598901.

The conference call will also be available via webcast at: http://edge.media-server.com/m/p/6bjewxut/lan/en and the earnings release can be obtained via the company's web page at: http://www.westlake.com/fw/main/IR_Home_Page-123.html

 

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

(In thousands of dollars, except per share data)

Net sales

$

1,185,002

$

998,576

$

2,288,533

$

2,026,252

Cost of sales

831,821

692,605

1,650,806

1,433,271

Gross profit

353,181

305,971

637,727

592,981

Selling, general and administrative expenses

57,807

39,183

113,073

78,138

Income from operations

295,374

266,788

524,654

514,843

Interest expense

(8,958)

(9,539)

(18,549)

(18,696)

Other income, net

22,058

4,601

31,154

7,110

Income before income taxes

308,474

261,850

537,259

503,257

Provision for income taxes

98,413

92,407

176,791

175,782

Net income

210,061

169,443

360,468

327,475

Net income attributable to noncontrolling interests

4,966

9,031

Net income attributable to Westlake Chemical Corporation

$

205,095

$

169,443

$

351,437

$

327,475

Earnings per common share attributable to Westlake Chemical Corporation:

Basic

$

1.55

$

1.27

$

2.65

$

2.45

Diluted

$

1.54

$

1.26

$

2.64

$

2.44

 

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

June 30,  2015

December 31,   2014

(In thousands of dollars)

ASSETS

Current assets

Cash and cash equivalents

$

1,026,569

$

880,601

Accounts receivable, net

600,722

560,666

Inventories

486,297

525,776

Other current assets

52,652

44,244

Total current assets

2,166,240

2,011,287

Property, plant and equipment, net

2,855,508

2,757,557

Other assets, net

389,262

445,146

Total assets

$

5,411,010

$

5,213,990

LIABILITIES AND EQUITY

Current liabilities (accounts payable and accrued liabilities)

$

534,658

$

537,180

Long-term debt

764,056

763,997

Other liabilities

695,121

710,925

Total liabilities

1,993,835

2,012,102

Total Westlake Chemical Corporation stockholders' equity

3,123,388

2,911,511

Noncontrolling interests

293,787

290,377

Total equity

3,417,175

3,201,888

Total liabilities and equity

$

5,411,010

$

5,213,990

 

WESTLAKE CHEMICAL CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30,

2015

2014

(In thousands of dollars)

Cash flows from operating activities

Net income

$

360,468

$

327,475

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

118,981

94,474

Deferred income taxes

3,088

19,359

Other balance sheet changes

(47,182)

(9,066)

Net cash provided by operating activities

435,355

432,242

Cash flows from investing activities

Additions to property, plant and equipment

(203,933)

(216,912)

Proceeds from sales and maturities of securities

15,037

342,045

Purchase of securities

(117,332)

Other, net

14,608

(277)

Net cash (used for) provided by investing activities

(174,288)

7,524

Cash flows from financing activities

Dividends paid

(43,896)

(33,623)

Distributions to noncontrolling interests

(7,218)

Proceeds from exercise of stock options

831

4,187

Repurchase of common stock for treasury

(62,804)

Other, net

(12)

4,436

Net cash used for financing activities

(113,099)

(25,000)

Effect of exchange rate changes on cash and cash equivalents

(2,000)

Net increase in cash and cash equivalents

145,968

414,766

Cash and cash equivalents at beginning of period

880,601

461,301

Cash and cash equivalents at end of period

$

1,026,569

$

876,067

 

WESTLAKE CHEMICAL CORPORATION

SEGMENT INFORMATION

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2015

2014

2015

2014

(In thousands of dollars)

Net external sales

Olefins

$

620,878

$

699,053

$

1,203,955

$

1,421,851

Vinyls

564,124

299,523

1,084,578

604,401

$

1,185,002

$

998,576

$

2,288,533

$

2,026,252

Income (loss) from operations

Olefins

$

220,938

$

238,657

$

412,041

$

510,990

Vinyls

87,966

38,129

135,052

17,015

Corporate and other

(13,530)

(9,998)

(22,439)

(13,162)

$

295,374

$

266,788

$

524,654

$

514,843

Depreciation and amortization

Olefins

$

27,623

$

26,721

$

54,562

$

53,368

Vinyls

32,599

21,623

64,183

40,791

Corporate and other

118

158

236

315

$

60,340

$

48,502

$

118,981

$

94,474

Other income (expense), net

Olefins

$

(104)

$

1,199

$

2,448

$

2,653

Vinyls

1,413

(213)

6,916

(247)

Corporate and other

20,749

3,615

21,790

4,704

$

22,058

$

4,601

$

31,154

$

7,110

 

WESTLAKE CHEMICAL CORPORATION

RECONCILIATION OF EBITDA TO NET INCOME AND TO NET CASH

PROVIDED BY OPERATING ACTIVITIES

(Unaudited)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

2015

2015

2014

2015

2014

(In thousands of dollars)

EBITDA

$

297,017

$

377,772

$

319,891

$

674,789

$

616,427

Less:

Provision for income taxes

78,378

98,413

92,407

176,791

175,782

Interest expense

9,591

8,958

9,539

18,549

18,696

Depreciation and amortization

58,641

60,340

48,502

118,981

94,474

Net income

150,407

210,061

169,443

360,468

327,475

Changes in operating assets and liabilities

34,818

36,981

39,210

71,799

85,408

Deferred income taxes

5,331

(2,243)

11,084

3,088

19,359

Net cash provided by operating activities

$

190,556

$

244,799

$

219,737

$

435,355

$

432,242

 

WESTLAKE CHEMICAL CORPORATION

SUPPLEMENTAL INFORMATION

Product Sales Price and Volume Variance by Operating Segments

Second Quarter 2015 vs. Second Quarter 2014

Second Quarter 2015 vs. First Quarter 2015

Average

Sales Price

Volume

Average

Sales Price

Volume

Olefins

-29.4%

+18.2%

+0.1%

+6.4%

Vinyls

-11.3%

+99.7%

+9.8%

-1.4%

Company

-24.0%

+42.6%

+4.7%

+2.7%

 

Average Quarterly Industry Prices (1)

Quarter Ended

June 30, 2014

September 30, 2014

December 31,  2014

March 31, 2015

June 30, 2015

Ethane (cents/lb)

9.8

7.9

7.0

6.3

6.2

Propane (cents/lb)

25.2

24.6

18.1

12.6

10.8

Ethylene (cents/lb) (2)

55.5

66.6

56.2

36.6

36.1

Polyethylene (cents/lb) (3)

109.0

110.0

108.7

76.7

78.3

Styrene (cents/lb) (4)

82.2

85.8

73.5

54.3

65.8

Caustic soda ($/short ton) (5)

595.0

588.3

595.0

588.3

576.7

Chlorine ($/short ton) (6)

232.5

232.5

232.5

239.2

268.3

PVC (cents/lb) (7)

69.5

70.2

69.2

65.5

67.5

________________

(1)

Industry pricing data was obtained from IHS Chemical. We have not independently verified the data

(2)

Represents average North American spot prices of ethylene over the period as reported by IHS Chemical

(3)

Represents average North American contract prices of polyethylene low density film over the period as reported by IHS Chemical

(4)

Represents average North American contract prices of styrene over the period as reported by IHS Chemical

(5)

Represents average North American undiscounted contract prices of caustic soda over the period as reported by IHS Chemical

(6)

Represents average North American contract prices of chlorine (into chemicals) over the period as reported by IHS Chemical

(7)

Represents average North American contract prices of PVC over the period as reported by IHS Chemical

 

 

SOURCE Westlake Chemical Corporation



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