Westlake Chemicals Returns to Profit on Higher Olefins Prices

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Researched by Industrial Info Resources (Sugar Land, Texas)--Westlake Chemical Corporation (NYSE:WLK) (Houston, Texas) recently reported earnings for the first quarter of the 2010 fiscal year. The company showed a strong return to profit with $17.6 million in net income, compared with a net loss of $6.1 million in the same period last year. Net sales of $778.3 million were up 59% from 1Q09, primarily because of higher sales price and a 7.2% increase in sales volume.

Westlake operates two primary business segments: Olefins and Vinyls. While the Vinyls segment was marginally better, it still incurred a loss from operations of $14.9 million. On the other hand, income from operations in the Olefins segment rose a massive 262% to $58.2 million. In a company press release, Westlake pointed to a 57.6% increase in average sales prices in the segment, as well as increased sales volumes of 17.3%, as being responsible for the increased earnings in the segment.

"Prices for ethylene rose steadily in the quarter and continued to remain elevated throughout the quarter," said Westlake President and CEO Alfred Chao in a conference call. "The sustained high level of ethylene prices and supply constraints due to cold weather prompted the ethylene industry to implement price increases totaling 18 cents a pound during the first quarter to offset the effect of these higher feedstock costs.

"The PVC industry has also responded to the higher ethylene prices with a series of price increases during the quarter," continued Chao. "But these increases were not sufficient to completely offset the cost of higher feedstock costs."

Most of Westlake's ethylene production is used as feedstock for the company's production of polyethylene and vinyls.

Industrial Info is tracking $370 million of active Westlake projects, including $30 million in future maintenance turnarounds. Tentatively scheduled to kick off next year is a chlor-alkali unit addition at the company's facility in Geismar, Louisiana. The estimated $300 million project was originally scheduled to begin construction last summer, but was delayed because of market conditions. Information on this and other projects is available in Industrial Info's North American Industrial Database.

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