Westlake Announces Second Quarter 2013 Earnings

HOUSTON, July 30, 2013 /PRNewswire/ -- Westlake Chemical Corporation (NYSE: WLK) today reported record net income of $145.8 million, or $2.17 per diluted share, on net sales of $939.0 million for the quarter ended June 30, 2013. This represents an increase in net income of $30.3 million, or $0.45 per diluted share, compared to the quarter ended June 30, 2012 net income of $115.5 million, or $1.72 per diluted share, on net sales of $914.0 million. Net sales for the second quarter of 2013 increased by $25.0 million compared to net sales for the second quarter of 2012, mainly attributable to higher sales volumes for building products, PVC resin and caustic, partially offset by lower feedstock and ethylene sales volumes. Income from operations was $235.2 million for the second quarter of 2013 as compared to $171.0 million for the second quarter of 2012. Income from operations for the second quarter of 2013 benefited primarily from improved olefins and vinyls integrated product margins predominantly due to lower feedstock costs as compared to the second quarter of 2012. Industry ethane prices declined 32.4% and industry propane prices declined 6.5% in the second quarter of 2013 as compared to the second quarter of 2012. Income from operations for the second quarter of 2013 was negatively impacted by non-recurring costs of $5.7 million, or $0.05 per diluted share, after tax related to the Company's acquisition of CertainTeed Corporation's pipe and foundation business ("PFG"), which closed in the second quarter of 2013.

Second quarter 2013 net income of $145.8 million, or $2.17 per diluted share, increased from the $123.3 million, or $1.84 per diluted share, reported by the Company in the first quarter of 2013. Second quarter 2013 sales of $939.0 million increased $74.4 million compared to sales of $864.6 million in the first quarter of 2013. The increase in sales was largely due to higher sales volumes for PVC resin, building products and caustic. Second quarter 2013 income from operations of $235.2 million increased by $41.2 million over the income from operations in the first quarter of 2013 of $194.0 million. Income from operations in the second quarter of 2013 benefited from higher sales prices for polyethylene and PVC resin and higher sales volumes for most of our major vinyls products as compared to the first quarter of 2013. Income from operations for the first quarter of 2013 was negatively impacted by the lost production and costs associated with the turnaround and expansion of one of our Lake Charles ethylene units.

For the six months ended June 30, 2013, net income was $269.2 million, or $4.01 per diluted share, on net sales of $1,803.7 million. This represents an increase in net income of $65.9 million, or $0.98 per diluted share, from the six months ended June 30, 2012 net income of $203.3 million, or $3.03 per diluted share, on net sales of $1,948.8 million. Net sales for the six months ended June 30, 2013 decreased by $145.1 million compared to the prior year period mainly due to lower feedstock, ethylene and ethylene co-products sales volumes, partially offset by higher sales volumes for PVC resin and building products and higher caustic sales prices and sales volume. Income from operations was $429.3 million for the six months ended June 30, 2013 as compared to $316.6 million for the six months ended June 30, 2012. The increase in income from operations was primarily attributable to higher olefins and vinyls integrated product margins as compared to the prior year period, predominantly due to a significant decrease in feedstock costs as industry ethane prices decreased 45.4% and industry propane prices decreased 20.8% during the first six months of 2013 as compared to the first six months of 2012.

Albert Chao, President and Chief Executive Officer, stated, "We are pleased to report record quarterly earnings largely driven by lower cost natural-gas based ethylene production resulting from North American shale gas and oil production. In addition, our Vinyls segment continues to improve as the U.S. economy slowly recovers. We continue to make progress on our integration strategy with the completion of the expansion of one of our ethylene crackers at our Lake Charles, Louisiana site and the acquisition of a specialty PVC pipe business in the first half of 2013. Our planned completion of a new chlor-alkali plant in Geismar, Louisiana in the fourth quarter of this year, and the conversion to ethane feedstock and expansion of our ethylene and PVC capacity in Calvert City, Kentucky in 2014 are expected to further improve the profitability of our Vinyls segment."

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $275.3 million for the second quarter of 2013 increased $51.5 million compared to EBITDA of $223.8 million for the second quarter of 2012. EBITDA for the second quarter of 2013 increased $42.4 million compared to the $232.9 million reported in the first quarter of 2013. A reconciliation of EBITDA to 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 $255.5 million in the first six months of 2013. Capital expenditures for the first six months of 2013 were $297.9 million. In addition, in the second quarter of 2013 the Company acquired PFG for $175.0 million, subject to a post-closing working capital adjustment. As of June 30, 2013, our cash, cash equivalents and current marketable securities totaled $655.5 million, and our long-term debt was $763.8 million.

OLEFINS SEGMENT

Income from operations increased by $31.8 million to $187.7 million in the second quarter of 2013 from $155.9 million in the second quarter of 2012. This increase was mainly attributable to higher olefins integrated product margins as compared to the prior year period, primarily as a result of significantly lower feedstock costs.

Income from operations for the second quarter of 2013 for the Olefins segment was $187.7 million, an increase of $26.7 million from the $161.0 million reported in the first quarter of 2013. Income from operations in the second quarter of 2013 benefited from higher integrated margins primarily as a result of higher sales prices for polyethylene, and higher ethylene sales volumes compared to the first quarter of 2013, which was partially offset by lower polyethylene sales volumes. The first quarter of 2013 was negatively impacted by the lost production and costs associated with the turnaround and expansion of one of our ethylene units in Lake Charles.

Income from operations increased by $63.6 million to $348.7 million for the six months ended June 30, 2013 from $285.1 million for the six months ended June 30, 2012. This increase was mainly attributable to higher olefins integrated product margins as compared to the prior year period. Margins improved primarily as a result of lower feedstock costs, which were only partially offset by lower sales prices. Income from operations for the six months ended June 30, 2013 was negatively impacted by the lost production and the expensing of $19.9 million related to unabsorbed fixed manufacturing costs and other costs associated with the turnaround and expansion of one of our ethylene units in Lake Charles.

VINYLS SEGMENT

Income from operations increased by $30.3 million to $52.9 million in the second quarter of 2013 from $22.6 million in the second quarter of 2012. This increase was primarily driven by higher vinyls integrated product margins largely resulting from lower feedstock costs and higher sales volumes for all major products as compared to the prior year period, partially offset by the non-recurring costs related to the PFG acquisition. The second quarter 2012 income from operations was negatively impacted by an unscheduled shut down of our Geismar vinyls complex in March 2012 and the expensing of costs associated with that event.

The Vinyls segment reported income from operations of $52.9 million in the second quarter of 2013, an improvement of $9.2 million compared to the income from operations of $43.7 million in the first quarter of 2013. The improvement was primarily due to higher sales volumes for PVC resin, building products and caustic as well as higher sales prices for PVC resin, which were partially offset by lower ethylene co-product sales prices, when compared to the first quarter of 2013.

Income from operations increased by $52.9 million to $96.6 million for the six months ended June 30, 2013 from $43.7 million for the six months ended June 30, 2012. This increase was predominantly driven by lower feedstock costs and higher sales volumes for all major products as compared to the six months ended June 30, 2012. The Vinyls segment's operating results for the first six months of 2012 were negatively impacted by the lost production, lost sales and unabsorbed manufacturing and other costs associated with the unscheduled shut-down of our Geismar vinyls complex.

The statements in this release relating to matters that are not historical facts, including statements regarding the planned completion of a new chlor-alkali plant and the conversion to ethane feedstock and expansion of our ethylene and PVC capacity in Calvert City, Kentucky and the expected further improvement in profitability of the Vinyls segment, are forward-looking statements that are subject to 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, 2012, which was filed with the SEC on February 22, 2013, and to Westlake's Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, which was filed with the SEC on May 7, 2013.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's second quarter 2013 results will be held Tuesday, July 30, 2013 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). To access the conference call, dial (866) 383-8009, or (617) 597-5342 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 729 58 512.

A replay of the conference call will be available beginning one hour after its conclusion until 1:00 p.m. Eastern Time on Tuesday, August 6, 2013. To hear a replay, dial (888) 286-8010, or (617) 801-6888 for international callers. The replay passcode is 966 27 066.

The conference call will also be available via webcast at http://phx.corporate-ir.net/phoenix.zhtml?c=180248&p=IROL-EventDetails&EventID=4985961 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.

SOURCE Westlake Chemical Corporation