Olefins pricing, PE, caustic volumes, buoy Westlake Q2 income

05 August 2014 12:58 Source:ICIS News
(adds sector detail, Vinnolit and MLP commentary)

LONDON (ICIS)--Westlake Chemical Corporation’s net income for the second quarter of 2014 increased by 16% year on year to $169.4m on the back of stronger pricing for most of its olefins products, the US-headquartered producer said on Tuesday.

The company also benefited from higher volumes for its polyethylene (PE), styrene and caustic soda products, partially offset by lower sales for its polyvinyl chloride (PVC) resin and ethylene co-products due to maintenance of its Calvert City, Kentucky cracker, and the conversion of an ethylene plant from propane to ethane feedstock, the company said.

The company, which recently closed its acquisition of Germany-based PVC producer Vinnolit, said sales increase 6.3% year on year during the quarter to $998.6m.

Westlake president and CEO Albert Chao, said, “We continue to benefit from low cost, ethane-based ethylene production that is the result of North American shale oil and gas production, as well as from the increased ethylene capacity from our recent ethylene expansion projects.”

Income from operations for Westlake’s olefins segment jumped by $51m year on year during the second quarter of the year to $238.7m on the back of growing product margins outstripping increases in feedstock and energy costs, as well as higher PE and styrene sales volumes.

Second-quarter vinyls division income from operations dropped $14.8m year on year to $38.1m, due to lower sales volumes on the back of the first-quarter Calvert City turnaround, and higher cost inventory. The increased costs were due in large part to propane feedstocks purchased in the first quarter of 2014, that impacted on the cost of sales in the second quarter, Westlake added.

The company completed the initial public offering of its newly-formed Westlake chemical Partners LP - a Houston-headquartered limited partnership set up to operate, acquire and develop ethylene assets - on 4 August.

The company listed in New York at $24 per share, which rose in price over the course of the first day’s trading to close at over $29 apiece. The issued common stock in the company represents a total 47.8% limited partner interest in the business, with Westlake and affiliates owning the remaing 52.2%.

Commenting on the Vinnolit acquisition and the master limited partnership (MLP) listing, Chao said: “We completed the acquisition of German-based Vinnolit Holdings GmbH and its subsidiaries on July 31, which allows us to expand our chlor-vinyl business globally and adds important specialty PVC products to our product portfolio.

“We believe the MLP creates value for our shareholders and provides a platform for future growth," he added.

By Tom Brown