Westlake Chemical (WLK)

Q3 2012 Earnings Call

November 08, 2012 11:00 am ET

Executives

David R. Hansen - Senior Vice President of Administration

Albert Y. Chao - Chief Executive Officer, President, Director, Member of Nominating & Governance Committee, Member of Compensation Committee and Member of Corporate Risk Committee

M. Steven Bender - Chief Financial Officer, Senior Vice President and Treasurer

Analysts

Brian Maguire - Goldman Sachs Group Inc., Research Division

Ben Richardson - JP Morgan Chase & Co, Research Division

Frank J. Mitsch - Wells Fargo Securities, LLC, Research Division

Aleksey V. Yefremov - BofA Merrill Lynch, Research Division

Hassan I. Ahmed - Alembic Global Advisors

Gregg A. Goodnight - UBS Investment Bank, Research Division

Donald Carson - Susquehanna Financial Group, LLLP, Research Division

Robert Reitzes

Presentation

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Corporation Third Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, ladies and gentlemen, this conference is being recorded today, November 8, 2012. I would now like to turn the call over to today's host, Dave Hansen, Westlake's Senior Vice President of Administration. Sir, you may now begin.

David R. Hansen

Thank you very much. Good morning, everyone, and thank you for joining us for the Westlake Chemical Corporation Third Quarter Conference Call. I am joined today by Albert Chao, our President and CEO; Steve Bender, our Senior Vice President and Chief Financial Officer; and other members of our management team. The agenda for today will be as follows: Albert will first make a few comments regarding Westlake's performance in the third quarter, and then give our current perspective on the industry; Steve will then provide you with a more detailed look at our financial and operating results; Albert will have a few concluding comments; and then we'll open the call up for questions.

Today, management is going to discuss certain topics that will contain forward-looking information that is based on management's beliefs as well as assumptions made by, and information currently available to, management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. Actual results could differ materially based upon factors including the cyclical nature of the chemical industry; availability, cost and volatility of raw materials, energy and utilities; governmental regulatory actions and political unrest; global economic conditions; industry operating rates; the supply-demand balance for Westlake's products; competitive products and pricing pressures; access to capital markets; technological developments; and other risk factors.

Westlake issued earlier this morning a press release with details of our quarterly financial and operating results. This document is available in the Press Release section of our webpage at westlake.com.

A replay of today's call will be available beginning 2 hours after completion of this call until 11:59 p.m. Eastern Time on November 15, 2012. The replay may be accessed by dialing the following numbers: domestic callers should dial 1 (888) 286-8010, international callers may access the replay at (617) 801-6888. The access code for both numbers is 37113299.

Please note that information reported on this call speaks only as of today, November 8, 2012. And therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay.

I would finally advise you that this conference is -- conference call is being broadcast live through the Internet webcast system and that it can be accessed on our webpage at westlake.com.

Now I'd like to turn the call over to Albert Chao.

Albert Y. Chao

Thank you, Dave. Good morning, ladies and gentlemen, and thank you for joining our earnings call. This morning, Westlake reported the strongest third quarter in our history with a net income of $87 million, or $1.30 per diluted share, on sales of $821 million. The earnings per share of $1.30 include the impact of costs related to a scheduled plant outage and debt retirement costs totaling $0.17 per share.

Our Olefins segment again delivered a strong performance. The improvement in performance of our Vinyls segment continued with its third consecutive quarterly increase in operating income.

The decrease in feedstock costs continued in the third quarter, particularly for ethane. The growing production of natural gas liquids from shale gas and oil production have caused ethane supply to become long as significant capacity in fractionation and pipeline infrastructure bring ethane to market faster than the North American chemical industry can consume it. Westlake's earnings this quarter reflected this ongoing benefit of expansion in shale gas production.

These lower-cost feedstocks have reset the North American chemical industry's cost position globally and have spurred a resurgence in debottlenecking and other expansion projects to capitalize on this advantageous position.

Now let me turn over to Steve for a more detailed look in our financial and operating results for the third quarter.

M. Steven Bender

Thank you, Albert, and good morning, everyone. I will begin with a discussion of the consolidated financial results, followed by a more detailed discussion of our Olefins and Vinyls segment results.

Let me start with our consolidated results. As we reported in this morning's press release, Westlake had third quarter earnings of $87 million, or $1.30 per diluted share, a 29% improvement over the $68 million, or $1.01 per diluted share, in the third quarter of 2011.

This quarter's results included the impact of $7 million, or $0.07 a share, related to debt refinancing costs and $10.5 million, or $0.10 a share, due to the unabsorbed manufacturing costs related to the scheduled turnaround of our styrene unit. Olefins margins increased in the third quarter of 2012 compared to the same period in 2011 due to a significant decrease in feedstock cost, strong ethylene demand and robust polyethylene sales volumes.

Read the rest of this transcript for free on seekingalpha.com

Copyright 2012 Seeking Alpha