Westlake to ramp up maintenance of Axiall plants

HOUSTON (ICIS)–Westlake Chemical will undertake a rigorous maintenance schedule in 2017 and spend $550m-600m to improve production performance and remedy acquired reliability issues at plants the company bought from Axiall in mid-2016, company executives said on Tuesday.

That 2017 spending also includes capital expenditure to expand its annual ethylene capacity in Calvert City, Kentucky, by 100m lbs and 2017 work on its joint ethylene venture with South Korea firm Lotte Chemical in Lake Charles, Louisiana.

But much will go to a heavy period of maintenance expected to last through the first three quarters, though it will not be concluded until the end of the year, company executives said.

Much of the work will be done to wrestle modern run rates and improve reliability at former Axiall plants that have a history of problems, including fires and releases of dangerous chemicals, as well as lagging production levels, Westlake officials said.

“We continue to be focused on improving performance … and reliability,” said Steven Bender, Westlake’s senior vice president, CFO and treasurer, during a conference call on Tuesday to discuss Westlake’s financial performance for Q4 and all of 2016 with equities analysts.

The company is undergoing a planned maintenance at its Lake Charles facility bought by Axiall that has had poor production rates of vinyl chloride monomer (VCM) for months. The company planned the maintenance in order to remedy an ongoing problem.

An Axiall VCM plant in Lake Charles endured fires two Decembers in a row during 2012 and 2013. But it was not clear if it is the same unit that continues to endure operating difficulty.

Maintenance at the plants was deferred ahead of the acquisition, Westlake executives said.

“It’s catch-up,” Bender said.

Westlake lost revenue of more than $55m from lost sales and maintenance costs during the fourth quarter, including $17.7m from an unplanned outage at its Calvert City, Kentucky, complex, not part of the Axiall acquisition.

Earlier on Tuesday, the company reported that Q4 2016 net income fell by 11% year on year to $99m on the back of plant outages and turnarounds, while sales rose by 76% to $1.74bn.

For full-year 2016, Westlake’s sales stood at $5.08bn, up 14% compared to 2015, while net income fell sharply from $646m to $399m.