Westlake Chemical Reports High Turnaround Schedule for 2017

Researched by Industrial Info Resources (Sugar Land, Texas)--Executives with Westlake Chemical Corporation (NYSE:WLK) (Houston, Texas) warned that high maintenance activity could impact earnings throughout 2017. Industrial Info is tracking $350 million of active Westlake projects.

Westlake agreed to acquire vinyl maker Axiall Corporation for $2.4 billion last year, adding to the company's capital and maintenance expenditures, as noted by Westlake Chief Executive Officer Albert Chao during the company's fourth-quarter 2016 earnings conference call: "The fourth quarter marked the beginning of several planned investments to improve the performance of our plants, address the deferred maintenance issues at a number of Axiall plant sites and pursue our cost-related synergies."

During the conference call, Chief Financial Officer Steven Bender said, "This year will continue to focus on improving operations by investing in reliability improvements and catching up on deferred maintenance activity of our acquired assets. Our estimate for 2017 capital expenditures is expected to be in the range of $550 [million] to $600 million dollars."

The company said last year it expected 2016 capital expenditures to be in the range of $475 million to $525 million.

"Our efforts to address deferred turnarounds and maintenance work of our recently acquired assets began in 2016 and we will continue in these efforts in 2017, as we will have a busy turnaround schedule for the first three quarters, above our normal run rate, as we perform turnarounds which had previously been deferred on our acquired assets," said Bender.

Westlake reported net income of $98.9 million in fourth-quarter 2016, compared with net income of $111 million in fourth-quarter 2015.

Among Westlake's capital projects being tracked by Industrial Info is the expansion of the company's ethylene unit in Calvert City, Kentucky. The project will expand the existing 630 million-pound-per-year unit by 70 million pounds per year by installing additional equipment, including distillation columns, pressure vessels and heat exchangers. Construction on the project began in early 2016 and is expected to be wrapped up this summer.

Bender said, "In the first quarter of this year, along with the ethylene expansion project at our Calvert City site, we have turnarounds at our Plaquemine and Geismar vinyl sites, along with other planned turnarounds which will impact earnings by approximately $60 million. The second quarter will see an equally busy turnaround schedule, and the impact on earnings will also be approximately $60 million. In the second half of 2017, we will continue to work on improving reliability, and we will see additional planned turnarounds impacting earnings by approximately $50 million."

The turnarounds at the company's Geismar and Plaquemine sites are expected to kick off this quarter and take less than a month to complete.

The company expects to return to more traditional operating and capital expenditures after the turnarounds are complete. "We expect to return to normal operating and maintenance levels by 2018," said Bender.

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