Westlake Chemical Corporation Announces Record Third Quarter 2017 Earnings

Westlake Chemical Corporation (NYSE: WLK) today reported record net income for the three months ended September 30, 2017 of $210.8 million, or $1.61 per diluted share, on record net sales of $2,108.9 million. Net income attributable to Westlake Chemical Corporation increased $145.1 million, or $1.10 per diluted share, compared to third quarter 2016 net income attributable to Westlake Chemical Corporation of $65.7 million, or $0.51 per diluted share, on net sales of $1,279.0 million. Net income for the third quarter of 2017 increased versus the prior-year period primarily due to (1) earnings contributed by Axiall, which was acquired on August 31, 2016; (2) lower transaction and integration-related costs associated with the acquisition; and (3) higher sales prices for our major products resulting in improved margins. These increases, as compared to the third quarter of 2016, were partially offset by (1) higher interest expense due to the increased debt balance as a result of the acquisition; (2) a third quarter 2016 realized gain of $49.1 million from the previously held common stock of Axiall; and (3) a higher effective tax rate. Net sales for the third quarter of 2017 increased by $829.9 million compared to net sales for the third quarter of 2016, mainly due to higher sales contributed by Axiall and higher sales prices for our major products. Income from operations was $365.7 million for the third quarter of 2017 as compared to $46.6 million for the third quarter of 2016. The increase in income from operations for the third quarter of 2017 was mainly a result of earnings contributed by Axiall, lower transaction and integration-related costs, and higher sales prices as compared to the third quarter of 2016. The third quarter of 2017 was negatively impacted by $6.7 million in transaction and integration-related costs, or $0.03 per diluted share.

 

Third quarter 2017 net income attributable to Westlake of $210.8 million, or $1.61 per diluted share, increased $58.0 million from the $152.8 million, or $1.17 per diluted share, reported in the second quarter of 2017. Net sales for the third quarter of 2017 of $2,108.9 million were $129.7 million higher than the $1,979.2 million reported in the second quarter of 2017. Income from operations for the third quarter of 2017 of $365.7 million was $98.6 million higher than the $267.1 million reported in the second quarter of 2017. Net income and income from operations in the third quarter of 2017 increased from the second quarter of 2017 mainly due to higher sales volumes for all of our major products, higher sales prices for our major products and lower costs associated with planned turnaround and unplanned outages.

 

For the nine months ended September 30, 2017, net income attributable to Westlake Chemical Corporation was $501.8 million, or $3.85 per diluted share, on net sales of $6,030.7 million. This represents an increase in net income attributable to Westlake Chemical Corporation of $201.9 million, or $1.56 per diluted share, compared to the nine months ended September 30, 2016 net income attributable to Westlake Chemical Corporation of $299.9 million, or $2.29 per diluted share, on net sales of $3,340.3 million. Net income for the nine months ended September 30, 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; and (3) lower transaction and integration-related costs associated with the integration of Axiall. These increases were partially offset by higher interest expense due to the increased debt balance and the realized gain in the third quarter of 2016 of $49.1 million from the previously held common stock of Axiall. Net sales for the nine months ended September 30, 2017 increased by $2,690.4 million compared to net sales for the nine months ended September 30, 2016, mainly due to higher sales contributed by Axiall, which was acquired on August 31, 2016, and higher sales prices for our major products. Income from operations was $868.2 million for the nine months ended September 30, 2017 as compared to $428.8 million for the nine months ended September 30, 2016. The increase in income from operations was mainly a result of earnings contributed by Axiall and higher sales prices for our major products.

 

"We are very pleased with the record results for the third quarter of 2017 as we benefitted from strong demand for all of our major products in both our Olefins and Vinyls segments as well as increasing prices in our Vinyls business," said Albert Chao, President and Chief Executive Officer. "We would like to thank our employees for their continued efforts with the integration, improvement activities and initiatives to capture synergies associated with the Axiall transaction. We believe the acquisition and continued investments to improve the reliability and operational efficiency of our assets will enable us to be well positioned to fully leverage the improving Vinyls market."

 

Net cash provided by operating activities was $483.0 million for the third quarter of 2017 and $962.7 million for the first nine months of 2017. Capital expenditures for the third quarter of 2017 and for the first nine months of 2017 were $133.4 million and $414.3 million, respectively. As of September 30, 2017, cash and cash equivalents were $678.2 million and long-term debt was $3,349.4 million.

 

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $521.4 million for the third quarter of 2017 increased $339.3 million compared to EBITDA of $182.1 million in the third quarter of 2016. EBITDA for the third quarter of 2017 increased $110.2 million compared to EBITDA of $411.2 million in the second quarter of 2017. For the first nine months of 2017, EBITDA of $1,323.3 million was $615.2 million higher than EBITDA for the first nine months of 2016 of $708.1 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.