Westlake Chemical Corporation Announces Second Quarter 2017 Earnings

  Westlake Chemical Corporation Announces Second Quarter 2017 Earnings

  * Record Vinyls quarterly income from operations of $143.3 million,
    increased 100% from the first quarter of 2017
  * Quarterly net income of $152.8 million and cash flow from operating
    activities of $322.3 million
  * Record quarterly sales and EBITDA of $1,979.2 million and $411.2 million,
    respectively

Business Wire

HOUSTON -- August 3, 2017

Westlake Chemical Corporation (NYSE: WLK) today reported net income for the
three months ended June 30, 2017 of $152.8 million, or $1.17 per diluted
share, on net sales of $1,979.2 million. Earnings per diluted share for the
second quarter of 2017 was negatively impacted by pre-tax integration costs of
$8.1 million, or $0.04 per diluted share, associated with the integration of
Axiall following its acquisition in August 2016. Net income attributable to
Westlake Chemical Corporation increased $41.7 million, or $0.32 per diluted
share, compared to second quarter 2016 net income attributable to Westlake
Chemical Corporation of $111.1 million, or $0.85 per diluted share, on net
sales of $1,086.1 million. Net income for the second quarter of 2017 increased
versus the prior year period primarily due to (1) earnings contributed by
Axiall; (2) higher sales prices for our major products resulting in improved
margins; (3) a lower second quarter 2017 effective tax rate primarily due to a
lower estimated annual tax rate for 2017 as compared to the prior year; and
(4) lower costs associated with planned turnarounds and unplanned outages.
These increases were partially offset by higher interest expense due to an
increased debt balance. Net sales for the second quarter of 2017 increased by
$893.1 million compared to net sales for the second quarter of 2016, mainly
due to sales contributed by Axiall and higher sales prices for our major
products. Income from operations was $267.1 million for the second quarter of
2017 as compared to $179.9 million for the second quarter of 2016. The
increase in income from operations for the second quarter of 2017 was mainly a
result of earnings contributed by Axiall and higher sales prices for most of
our major products.

Second quarter 2017 net income of $152.8 million, or $1.17 per diluted share,
increased $14.6 million from the $138.2 million, or $1.06 per diluted share,
reported in the first quarter of 2017. Net sales for the second quarter of
2017 of $1,979.2 million were higher than the $1,942.6 million reported in the
first quarter of 2017. Income from operations for the second quarter of 2017
of $267.1 million was $31.8 million higher than the $235.3 million reported in
the first quarter of 2017. Net income and income from operations in the second
quarter of 2017 increased from the first quarter mainly due to higher sales
prices for all of our major Vinyls products, partially offset by lower
polyethylene sales volumes as well as increased costs associated with planned
turnarounds and unplanned outages.

For the six months ended June 30, 2017, net income attributable to Westlake
Chemical Corporation was $291.0 million, or $2.23 per diluted share, on net
sales of $3,921.8 million. This represents an increase in net income
attributable to Westlake Chemical Corporation of $56.7 million, or $0.44 per
diluted share, compared to the six months ended June 30, 2016 net income
attributable to Westlake Chemical Corporation of $234.3 million, or $1.79 per
diluted share, on net sales of $2,061.2 million. Net income for the six months
ended June 30, 2017 increased versus the prior year period primarily due to
(1) higher sales prices for our major products resulting in improved margins;
(2) earnings contributed by Axiall; and (3) a lower effective tax rate for the
six months ended June 30, 2017 primarily due to certain discrete tax
adjustments and a lower estimated annual tax rate for 2017 as compared to the
prior year. These increases were partially offset by higher interest expense
due to an increased debt balance, pre-tax transaction and integration-related
costs of approximately $16.3 million associated with the integration of
Axiall, or $0.09 per diluted share. Net sales for the six months ended June
30, 2017 increased by $1,860.6 million compared to net sales for the six
months ended June 30, 2016, mainly due to sales contributed by Axiall and
higher sales prices for our major products. Income from operations was $502.4
million for the six months ended June 30, 2017 as compared to $382.2 million
for the six months ended June 30, 2016. The increase in income from operations
for the six months ended June 30, 2017 was mainly a result of earnings
contributed by Axiall and higher sales prices for most of our major products,
resulting in higher integrated product margins.

"We are pleased with our results for the second quarter of 2017 as we
benefitted from strong demand for all of our major products and increasing
prices in our Vinyls segment," said Albert Chao, President and Chief Executive
Officer. "Thanks to the efforts of our employees, we are continuing to
progress with the integration, improvement activities and synergies associated
with the acquisition of Axiall. We believe the acquisition and continued
investment will position us to fully leverage the improving Vinyls
environment."

Net cash provided by operating activities was $322.3 million for the second
quarter of 2017 and $479.7 for the first six months of 2017. Capital
expenditures for the second quarter of 2017 were $146.6 million and $280.9
million for the first six months of 2017. As of June 30, 2017, we had cash,
cash equivalents and restricted cash of $404.4 million and long-term debt was
$3,489.9 million.

EBITDA (earnings before interest expense, income taxes, depreciation and
amortization) of $411.2 million for the second quarter of 2017 increased
$155.8 million compared to EBITDA of $255.4 million in the second quarter of
2016. EBITDA for the second quarter of 2017 increased $20.6 million compared
to EBITDA of $390.6 million in the first quarter of 2017. For the first six
months of 2017, EBITDA of $801.8 million was $275.8 million higher than the
EBITDA for the first six months of 2016 of $526.0 million. 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.

OLEFINS SEGMENT

The Olefins segment reported income from operations of $143.3 million in the
second quarter of 2017, an increase of $2.7 million compared to income from
operations of $140.6 million in the second quarter of 2016. This increase was
mainly attributable to higher olefins integrated product margins, primarily
due to higher sales prices for our major products and higher production rates.
These increases were partially offset by lower sales volumes for polyethylene
and styrene. The second quarter of 2016 was negatively impacted by our planned
turnaround and expansion of OpCo's Lake Charles Petro 1 ethylene unit. Trading
activity in the second quarter of 2017 resulted in a loss of $0.4 million as
compared to a gain of $11.6 million in the second quarter of 2016.

The Olefins segment income from operations of $143.3 million for the second
quarter of 2017 decreased $36.5 million from the $179.8 million reported in
the first quarter of 2017, primarily due to lower polyethylene sales volumes
and costs associated with the planned turnarounds and unplanned outages that
occurred in the second quarter of 2017. Trading activity in the second quarter
of 2017 resulted in a loss of $0.4 million as compared to a loss of $9.2
million in the first quarter of 2017.

The Olefins segment income from operations of $323.1 million for the six
months ended June 30, 2017 increased by $33.3 million from $289.8 million for
the six months ended June 30, 2016. This increase was mainly attributable to
higher olefins integrated product margins, primarily due to higher sales
prices for our major products and higher sales volume of ethylene co-products,
higher production rates and lower costs associated with the turnaround and
outages as compared to the prior-year period. These increases were partially
offset by lower sales volumes for polyethylene and styrene. The six months
ended June 30, 2016 was negatively impacted by the planned turnaround and
expansion of OpCo's Lake Charles Petro 1 ethylene unit along with other
unplanned outages. Trading activity in the six months ended June 30, 2017
resulted in a loss of $9.6 million as compared to a gain of $15.6 million in
the six months ended June 30, 2016.

VINYLS SEGMENT

The Vinyls segment income from operations of $143.3 million in the second
quarter of 2017 increased by $91.1 million from $52.2 million in the second
quarter of 2016. This increase was mainly attributable to earnings contributed
by Axiall and higher sales prices for PVC resin and caustic soda. These
increases were partially offset by higher feedstock and energy prices during
the quarter ended June 30, 2017, as compared to the prior-year period.

The Vinyls segment income from operations of $143.3 million for the second
quarter of 2017 increased $71.9 million from the $71.4 million reported in the
first quarter of 2017. This increase in income from operations was due to
increased margins on our major products driven by higher North American and
European sales prices and lower feedstock and energy costs.

The Vinyls segment income from operations of $214.8 million in the six months
ended June 30, 2017 increased by $100.5 million from $114.3 million in the six
months ended June 30, 2016. This increase was mainly attributable to the
earnings contributed by Axiall and higher sales prices of PVC resin and
caustic soda. These increases were partially offset by unabsorbed fixed
manufacturing costs and other costs associated with the planned turnaround and
expansion at the Calvert City facility and other planned turnarounds and
unplanned outages during the six months ended June 30, 2017.

The statements in this release and the related teleconference relating to
matters that are not historical facts, such as statements regarding future
benefits of our investments, improving Vinyls business environments and
potential synergies 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 and natural gas liquids from shale production; the price
of crude oil; 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;
Westlake’s ability to realize anticipated benefits of the Axiall acquisition
and to integrate Axiall’s business; 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, 2016, which was filed with the SEC in February 2017.

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

Westlake Chemical Corporation is an international manufacturer and supplier of
petrochemicals, polymers and building products with headquarters in Houston,
Texas. The company's range of products includes: ethylene, polyethylene,
styrene, propylene, chlor-alkali and derivative products, PVC suspension and
specialty resins, PVC Compounds, and PVC building products including siding,
pipe, fittings and specialty components, windows, fence, deck and film. For
more information, visit the company's Web site at www.westlake.com.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's first quarter
2017 results will be held Thursday, August 3, 2017 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 57772493.

A replay of the conference call will be available beginning two hours after
its conclusion until 11:59 p.m. Eastern Time on Thursday, August 10, 2017. To
hear a replay, dial (855) 859-2056, or (404) 537-3406 for international
callers. The replay passcode is 57772493.

The conference call will also be available via webcast at:
http://edge.media-server.com/m/p/wnj37dhe and the earnings release can be
obtained via the company's web page at:
http://www.westlake.com/investor-relations.

 
WESTLAKE CHEMICAL CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
                              Three Months Ended June 30,         Six Months Ended June 30,
                              2017              2016              2017              2016
                              (In thousands of dollars, except per share data)
Net sales                     $ 1,979,161       $ 1,086,061       $ 3,921,777       $ 2,061,248
Cost of sales                 1,573,327         844,695           3,148,800         1,564,297    
Gross profit                  405,834           241,366           772,977           496,951
Selling, general
and administrative            130,626           53,719            254,277           107,028
expenses
Transaction and
integration-related           8,092             7,709             16,286            7,709        
costs
Income from                   267,116           179,938           502,414           382,214
operations
Interest expense              (38,972     )     (5,915      )     (78,748     )     (12,600     )
Other income                  (538        )     8,181             4,533             10,826       
(expense), net
Income before                 227,606           182,204           428,199           380,440
income taxes
Provision for                 68,188            66,584            124,071           135,884      
income taxes
Net income                    159,418           115,620           304,128           244,556
Net income
attributable to               6,591             4,496             13,111            10,304       
noncontrolling
interests
Net income
attributable to
Westlake Chemical             $ 152,827         $ 111,124         $ 291,017         $ 234,252    

  Corporation
Earnings per common
share attributable
to Westlake

  Chemical
Corporation:
Basic                         $ 1.18            $ 0.85            $ 2.24            $ 1.80
Diluted                       $ 1.17            $ 0.85            $ 2.23            $ 1.79       
 

 
WESTLAKE CHEMICAL CORPORATION
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
                                             June 30,             December 31,
                                                                 
                                             2017                 2016
                                             (In thousands of dollars)
ASSETS
Current assets
Cash and cash equivalents                    $ 395,776            $ 459,453
Accounts receivable, net                     1,095,808            938,743
Inventories                                  831,700              801,100
Prepaid expenses and other current           45,744               48,493
assets
Restricted cash                              8,607                160,527
Total current assets                         2,377,635            2,408,316
Property, plant and equipment, net           6,316,731            6,420,062
Other assets, net                            2,191,341            2,061,875
Total assets                                 $ 10,885,707         $ 10,890,253
                                                                   
LIABILITIES AND EQUITY
Current liabilities (accounts                $ 1,030,921          $ 1,033,742
payable and accrued liabilities)
Current term loan, net                       —                    149,341
Long-term debt, net                          3,489,900            3,678,654
Other liabilities                            2,155,843            2,136,471
Total liabilities                            6,676,664            6,998,208
Total Westlake Chemical                      3,840,837            3,523,629
Corporation stockholders' equity
Noncontrolling interests                     368,206              368,416
Total equity                                 4,209,043            3,892,045
Total liabilities and equity                 $ 10,885,707         $ 10,890,253
 

 
WESTLAKE CHEMICAL CORPORATION
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
                                                 Six Months Ended June 30,
                                                 2017              2016
                                                 (In thousands of dollars)
Cash flows from operating activities
Net income                                       $ 304,128         $ 244,556
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization                    294,899           132,964
Deferred income taxes                            14,962            102,990
Other balance sheet changes                      (134,275  )       (110,618  )
Net cash provided by operating                   479,714           369,892    
activities
Cash flows from investing activities
Additions to property, plant and                 (280,902  )       (287,160  )
equipment
Additions to cost method investment              (31,000   )       —
Proceeds from sales and maturities of            —                 302,432
securities
Purchase of securities                           —                 (138,422  )
Other, net                                       1,429             (3,267    )
Net cash used for investing activities           (310,473  )       (126,417  )
Cash flows from financing activities
Debt issuance costs                              (376      )       (9,700    )
Dividends paid                                   (49,315   )       (47,317   )
Distributions to noncontrolling                  (16,033   )       (8,084    )
interests
Proceeds from issuance of notes                  3,544             3,842
payable
Proceeds from drawdown on revolver               175,000           —
Restricted cash associated with term             154,000           —
loan
Repayment of term loan                           (150,000  )       —
Repayment of notes payable                       (4,901    )       (8,626    )
Repayment of revolver                            (360,000  )       —
Repurchase of common stock for                   —                 (67,404   )
treasury
Other                                            1,477             800        
Net cash used for financing activities           (246,604  )       (136,489  )
Effect of exchange rate changes on               13,686            1,486
cash and cash equivalents
Net increase (decrease) in cash and              (63,677   )       108,472
cash equivalents
Cash and cash equivalents at beginning           459,453           662,525    
of the period
Cash and cash equivalents at end of              $ 395,776         $ 770,997  
the period
 

 
WESTLAKE CHEMICAL CORPORATION
 
SEGMENT INFORMATION
(Unaudited)
 
                       Three Months Ended June 30,         Six Months Ended June 30,
                       2017              2016              2017              2016
                       (In thousands of dollars)
Net external
sales
Olefins                $ 489,234         $ 494,484         $ 1,032,229       $ 925,504
Vinyls                 1,489,927         591,577           2,889,548         1,135,744    
                       $ 1,979,161       $ 1,086,061       $ 3,921,777       $ 2,061,248  
Income
(loss) from
operations
Olefins                $ 143,277         $ 140,564         $ 323,095         $ 289,799
Vinyls                 143,320           52,208            214,761           114,324
Corporate              (19,481     )     (12,834     )     (35,442     )     (21,909     )
and other
                       $ 267,116         $ 179,938         $ 502,414         $ 382,214    
Depreciation
and
amortization
Olefins                $ 35,175          $ 30,236          $ 76,215          $ 58,933
Vinyls                 106,822           36,268            214,095           72,555
Corporate              2,633             746               4,589             1,476        
and other
                       $ 144,630         $ 67,250          $ 294,899         $ 132,964    
Other income
(expense),
net
Olefins                $ 588             $ 1,093           $ 1,738           $ 2,606
Vinyls                 (1,534      )     4,466             2,058             2,949
Corporate              408               2,622             737               5,271        
and other
                       $ (538      )     $ 8,181           $ 4,533           $ 10,826     
 

 
WESTLAKE CHEMICAL CORPORATION
 
RECONCILIATION OF EBITDA TO NET INCOME AND
TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
 
                       Three
                       Months
                                       Three Months Ended June 30,     Six Months Ended June 30,
                       Ended March

                       31,
                       2017            2017            2016            2017            2016
                       (In thousands of dollars)
Net cash
provided by            $ 157,394       $ 322,320       $ 240,957       $ 479,714       $ 369,892
operating
activities
Changes in
operating
assets and             (18,957   )     (141,667  )     (80,984   )     (160,624  )     (22,346   )
liabilities

  and other
Deferred               6,273           (21,235   )     (44,353   )     (14,962   )     (102,990  )
income taxes
Net income             $ 144,710       $ 159,418       $ 115,620       $ 304,128       $ 244,556  
Add:
Depreciation
and                    150,269         144,630         67,250          294,899         132,964
amortization
Interest               39,776          38,972          5,915           78,748          12,600
expense
Provision
for income             55,883          68,188          66,584          124,071         135,884    
taxes
EBITDA                 $ 390,638       $ 411,208       $ 255,369       $ 801,846       $ 526,004  
 

 
WESTLAKE CHEMICAL CORPORATION
 
SUPPLEMENTAL INFORMATION
 
Product Sales Price and Volume Variance by Operating Segments
 
                  Second Quarter 2017 vs.          Second Quarter 2017 vs.
                  Second                           First

                  Quarter 2016                     Quarter 2017
                  Average                          Average
                                    Volume                            Volume
                  Sales Price                      Sales Price
Olefins           +7.8    %         -8.8    %      -3.1     %         -6.8  %
Vinyls            +8.9    %         +143.0  %      +4.7     %         +1.7  %
Company           +8.4    %         +73.9   %      +2.6     %         -0.7  %
 

 
Average Quarterly Industry Prices ^(1)
 
                         Quarter Ended
                         June       September     December     March     June
                         30,        30,           31,          31,       30,

                         2016       2016          2016         2017      2017
Ethane                   6.8        6.3           8.0          7.8       8.3
(cents/lb)
Propane                  11.7       11.2          13.7         16.9      14.9
(cents/lb)
Ethylene
(cents/lb)               25.9       32.5          28.2         31.2      27.6
^(2)
Polyethylene
(cents/lb)               67.0       68.7          65.3         67.3      69.0
^(3)
Styrene
(cents/lb)               65.2       66.8          69.3         85.6      84.4
^(4)
Caustic soda
($/short ton)            611.7      660.8         725.0        733.3     788.3
^(5)
Chlorine
($/short ton)            296.7      304.2         305.0        305.0     325.0
^(6)
PVC (cents/lb)           55.5       56.5          57.2         60.2      62.5
^(7)
 

________________
 
(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 net transaction prices of polyethylene
      low density GP-Film grade 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.
       
      Represents average North American contract prices of PVC over the period
      as reported by IHS Chemical. Effective January 1, 2017, IHS Chemical
(7)   made a non-market downward adjustment of 15 cents per pound to PVC
      prices. For comparability, we adjusted each prior-year period's PVC
      price downward by 15 cents per pound consistent with the IHS Chemical
      non-market adjustment.
 

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Contact:

Westlake Chemical Corporation
Investors
Steve Bender, 713-960-9111
or
Media
Ben Ederington, 713-960-9111
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