Westlake Chemical's Q4 net income down 69% year-over-year to US$26.4M on net sales of US$859.2M, up 8%; results reflect higher feedstock costs, which were only partially offset by higher building products, caustic sales prices

HOUSTON , February 21, 2012 (press release) – Westlake Chemical Corporation (NYSE: WLK) today reported net income for the three months ended December 31, 2011 of $26.4 million, or $0.40 per diluted share, compared to net income of $84.1 million, or $1.26 per diluted share, reported for the fourth quarter of 2010. Net sales for the three months ended December 31, 2011 of $859.2 million increased $63.8 million compared to net sales of $795.4 million in the same period of 2010, primarily due to higher sales volumes for polyethylene, styrene and PVC resin and higher sales prices for building products and caustic, partially offset by lower building products sales volume. Income from operations was $50.5 million for the fourth quarter of 2011 compared to $137.1 million for the fourth quarter of 2010. Fourth quarter of 2011 income from operations was lower primarily as a result of higher feedstock costs, which were only partially offset by higher building products and caustic sales prices.

Net income for the fourth quarter of 2011 of $26.4 million, or $0.40 per diluted share, decreased $41.5 million from the $67.9 million of net income, or $1.01 per diluted share, reported for the third quarter of 2011. Net sales in the fourth quarter of 2011 of $859.2 million decreased $109.2 million from net sales of $968.4 million in the third quarter of 2011, primarily as a result of lower sales prices for most of the Company's major products. Fourth quarter 2011 income from operations was $50.5 million as compared to $117.3 million reported for the third quarter of 2011, a decrease of $66.8 million. Operating income in the fourth quarter of 2011 decreased compared to the third quarter of 2011 primarily as a result of lower polyethylene, PVC resin and building products sales prices and higher feedstock costs.

Albert Chao, President and Chief Executive Officer, said, "In 2011 we celebrated our 25th year in business and also achieved the highest earnings in Company history, as earnings grew by 17% driven largely by improved integrated vinyls margins. In addition, we announced expansion programs to increase both our chlorine and ethane-based ethylene capacity. We believe our integration strategy, coupled with our advantaged feedstock position due to increased U.S. shale gas production, will continue to improve our profitability in both our Olefins and Vinyls businesses."

For the year ended December 31, 2011, Westlake had net income of $259.0 million, or $3.87 per diluted share, on net sales of $3,619.8 million. This represents an increase in net income of $37.6 million, or $0.53 per diluted share, from 2010 net income of $221.4 million, or $3.34 per diluted share, on net sales of $3,171.8 million in 2010. Net sales in 2011 increased $448.0 million over net sales in 2010 primarily due to higher sales prices for all our major products and higher sales volume for PVC resin, partially offset by lower building products sales volume. Income from operations was $446.8 million for the year ended December 31, 2011 as compared to $378.4 million for 2010, an increase of $68.4 million. Income from operations benefited primarily from improved caustic margins, higher PVC resin and building products sales prices and higher PVC resin sales volume as compared to 2010, partially offset by higher feedstock costs. The 2011 income from operations was negatively impacted by three separate events: an unscheduled outage at one of our ethylene units in Lake Charles, Louisiana, a scheduled major maintenance turnaround of our Calvert City facility and a fire at a third-party storage facility in Mont Belvieu, Texas. The 2010 results were negatively impacted by an unscheduled outage at one of our ethylene units in Lake Charles caused by severe weather.

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $84.9 million for the fourth quarter of 2011 decreased $87.5 million compared to $172.4 million in the fourth quarter of 2010. EBITDA for the fourth quarter of 2011 decreased $66.7 million compared to $151.6 million in the third quarter of 2011. 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 $362.3 million in 2011. Capital expenditures in 2011 were $176.8 million. At December 31, 2011, we had cash balances of $922.2 million, including $96.3 million of restricted cash, and our long-term debt was $764.6 million. The restricted cash is designated for qualifying amounts spent for certain capital additions in Louisiana.

OLEFINS SEGMENT

Income from operations for the Olefins segment decreased by $78.6 million to $75.9 million in the fourth quarter of 2011 from $154.5 million in the fourth quarter of 2010. The decrease was primarily due to higher feedstock costs.

Income from operations for the fourth quarter of 2011 for the Olefins segment of $75.9 million decreased $29.5 million from the $105.4 million reported in the third quarter of 2011. The decrease was primarily due to lower integrated product margins, largely as a result of lower polyethylene sales prices and higher feedstock costs.

Income from operations was $459.3 million in 2011 compared to $460.0 million in 2010 as higher polyethylene and styrene sales prices were mostly offset by higher feedstock costs as compared to 2010. In addition, income from operations for 2011 was negatively impacted by the unscheduled outage at one of our ethylene units in Lake Charles and the fire at a third-party storage facility at Mont Belvieu. Results for 2010 were negatively impacted by the unscheduled outage at one of our ethylene units in Lake Charles caused by severe weather.

VINYLS SEGMENT

The Vinyls segment reported a loss from operations of $19.6 million in the fourth quarter of 2011 compared to a loss from operations of $12.4 million in the fourth quarter of 2010, an unfavorable change of $7.2 million. The decrease in operating income was primarily the result of a decrease in PVC resin margins as higher feedstock costs outpaced sales price increases.

The Vinyls segment reported a loss from operations of $19.6 million in the fourth quarter of 2011 as compared to income from operations of $16.1 million in the third quarter of 2011. The decrease in operating income in the fourth quarter was the result of higher propane cracking costs at our Calvert City ethylene unit, a turnaround at our Geismar facility, a decrease in PVC resin and building products sales prices and a decrease in building products sales volumes.

The Vinyls segment reported income from operations of $4.0 million in 2011 as compared to a loss from operations of $62.4 million in 2010. The improvement in income from operations was primarily attributable to improved caustic, PVC resin and building products margins and higher PVC resin sales volume as compared to 2010. PVC resin sales volume benefited from a stronger export market in 2011. The improvement in operating results was partially offset by the negative impact of the turnaround at our Calvert City facility. Overall, Vinyls margins remained under pressure in 2011 due to the continued weakness in the U.S. construction markets and budgetary constraints in municipal spending.


 

WESTLAKE CHEMICAL CORPORATION

 
                 
 

CONSOLIDATED STATEMENTS OF OPERATIONS

 
 

(Unaudited)

 
             
                   
   

Three Months Ended

 

Twelve Months Ended

 
   

December 31,

 

December 31,

 
   

2011

 

2010

 

2011

 

2010

 
                   
   

(In thousands of dollars, except per share data)

 
                   

Net sales

$ 859,175

 

$ 795,387

 

$ 3,619,848

 

$ 3,171,787

 

Cost of sales

781,915

 

631,263

 

3,060,842

 

2,689,104

 

Gross profit

77,260

 

164,124

 

559,006

 

482,683

 
                   

Selling, general and administrative expenses

26,801

 

27,072

 

112,210

 

104,319

 
                   

Income from operations

50,459

 

137,052

 

446,796

 

378,364

 
                   

Interest expense

(12,543)

 

(11,301)

 

(50,992)

 

(39,875)

 

Other income, net

1,332

 

2,935

 

5,628

 

4,471

 
                   

Income before income taxes

39,248

 

128,686

 

401,432

 

342,960

 
                   

Provision for income taxes

12,805

 

44,613

 

142,466

 

121,567

 
                   

Net income

$ 26,443

 

$ 84,073

 

$ 258,966

 

$ 221,393

 
                   

Earnings per share:

               
 

Basic

$ 0.40

 

$ 1.27

 

$ 3.89

 

$ 3.35

 
 

Diluted

$ 0.40

 

$ 1.26

 

$ 3.87

 

$ 3.34

 
                 

 

 

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