Westlake Chemical Reports Record Third-Quarter Profit

Researched by Industrial Info Resources (Sugar Land, Texas)--Westlake Chemical (NYSE:WLK) (Houston, Texas) turned a record profit of $607 million in the third quarter--more than a tenfold increase year-over-year--on record net sales of $3.1 billion, driven by higher prices and margins for most of its major products following a global economic recovery, the company reported Tuesday.

Industrial Info is tracking $1.25 billion in active project activity belonging to Westlake.

Click on the image at right to view a graph showing Westlake Chemical's project activity, by the top five project types.

The vinyls segment saw record third-quarter income from operations of $601 million, up $166 million from the second quarter, largely due to sales of caustic soda and chlorine, which is used in the production of PVC. High margins for PVC resins were driven by strength in the residential construction and repair and remodeling markets.

In a quarterly earnings-related conference call, Chief Executive Officer Albert Chao said 50% of the company's building products are put toward remodeling and renovation, and noted a strong outlook for the U.S. housing market. He expects the Biden administration's infrastructure bill to drive additional demand for construction, further benefiting the building products segment.

The olefins segment also saw record income of $281 million as polyethylene experienced robust demand and tight inventories thanks to consumer demand for everyday packaging and healthcare products, according to the company. That is up from $230 million year-over-year, but just an increase of $4 million from the prior quarter--largely a result of Hurricane Ida, which made landfall along the Louisiana coast in late August.

The storm caused higher raw material and energy costs, which Westlake Chief Financial Officer Steve Bender said partly affected sales volumes in both segments. They also helped cause the company to slash $150 million from its remaining 2021 capital expenditures, to between $600 million and $650 million.

Ida and other unplanned outages took a bite out of third-quarter earnings before income taxes, interest expenses, depreciation and amortization (EBITDA) to the tune of between $80 million and $90 million, Bender said. Lastly, the hurricane forced the company to declare force majeure--which has now been lifted--at two of its Louisiana facilities: the Plaquemine PVC and Caustic Chlorine Plant and Geismar Vinyls Complex.

"In the third quarter, we accomplished a number of milestones at Westlake," Chao said in a press release. "We achieved a consecutive quarter of record earnings as we continue to benefit from the global economic expansion that began early in the second half of 2020 with strong demand across our product offerings."

Westlake acquired three companies for about $2.6 billion earlier this year to increase its product offerings, which has "created a platform for the next chapter of our growing building products business in North America," Chao said. These include LASCO Fittings Incorporated, a leading manufacturer of injection-molded PVC fittings; DIMEX LLC, which produces post-industrial recycled plastic consumer and building products; and Boral Limited's (Sydney, Australia) subsidiary Boral North America, which produces building products such as roofing, siding and decorative stone, among others. "These investments build our footprint in the sustainable building product markets, enhancing our position to drive greater value with new and complementary platforms and long-term growth opportunities for Westlake."

Chao specifically noted the December completion of a planned third-quarter maintenance turnaround of the 1.6 billion-pound-per-year Petro 2 ethylene unit at its Sulphur Petrochemicals Plant in Louisiana. The turnaround includes major inspections and repairs on the unit, area utilities and supporting equipment, in addition to capital tie-ins for equipment additions. The project kicked off in September after being postponed last year due to the COVID-19 pandemic. Subscribers to Industrial Info's Global Market Intelligence (GMI) Chemical Processing Project Database can see detailed reports on the maintenance turnaround and equipment addition projects.

Westlake is evaluating a future $450 million expansion at its 550 million-pound-per-year Geismar complex in Louisiana to increase the production capacity of vinyl chloride monomer (VCM) by installing process equipment. The chemical manufacturer also is assessing a $100 million production unit addition at its Calvert City PVC Resins Plant in Kentucky to increase the current capacity of approximately 1.1 million pounds per year of PVC resins. Subscribers can click here for detailed reports on the Geismar VCM expansion and Calvert City projects.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.