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Westlake Chemical Corporation Announces Fourth Quarter and Full Year 2016 Results
HOUSTON, Feb 21, 2017 (BUSINESS WIRE) -- Copyright Business Wire 2017

Westlake Chemical Corporation (NYSE: WLK) today reported net income of $98.9 million, or $0.76 per diluted share, on net sales of $1,735.2 million for the quarter ended December 31, 2016. This represents a decrease in net income of $12.1 million, or $0.08 per diluted share, compared to the quarter ended December 31, 2015 net income of $111.0 million, or $0.84 per diluted share, on net sales of $986.8 million. Net income for the fourth quarter of 2016 was impacted by:

-- pre-tax unabsorbed fixed manufacturing costs and other costs associated with the turnaround of the Lake Charles, Louisiana vinyls chlor-alkali unit, and other planned turnarounds and unplanned outages totaling approximately $38.9 million, or $0.19 per diluted share, and the lost sales associated with such turnarounds and outages;

-- the pre-tax impact of selling higher-cost Axiall inventory at fair value of approximately $13.8 million, or $0.07 per diluted share, following the acquisition of Axiall Corporation; and

-- pre-tax transaction and integration related expenses of approximately $13.1 million, or $0.07 per diluted share.

The above items were partially offset by a lower effective tax rate as a result of $28.6 million, or $0.22 per diluted share, in various tax adjustments. Net sales for the fourth quarter of 2016 increased over the fourth quarter of 2015, mainly due to sales contributed by Axiall. Income from operations was $152.7 million in the fourth quarter of 2016 compared to $181.1 million in the fourth quarter of 2015. Income from operations in the fourth quarter of 2016 was lower than the prior year period mainly as a result of the transaction and integration related costs, the effect of selling higher-cost Axiall inventory recorded at fair value, and the impact from the planned turnarounds and unplanned outages.

Fourth quarter 2016 net income of $98.9 million, or $0.76 per diluted share, increased $33.2 million from the $65.7 million, or $0.51 per diluted share, reported in the third quarter of 2016. Net sales for the fourth quarter of 2016 of $1,735.2 million were higher than the $1,279.0 million reported in the third quarter, mainly due to sales contributed by Axiall. Income from operations for the fourth quarter of 2016 of $152.7 million was higher than the $46.6 million reported in the third quarter of 2016. The improvement in income from operations was primarily due to lower transaction and integration costs as compared to the third quarter of 2016 and record ethylene production in the fourth quarter of 2016.

For the year ended December 31, 2016, net income was $398.9 million, or $3.06 per diluted share, on net sales of $5,075.5 million. This represents a decrease in net income of $247.1 million, or $1.80 per diluted share, from 2015 net income of $646.0 million, or $4.86 per diluted share, on net sales of $4,463.3 million. Net income for the year ended December 31, 2016 was impacted by (1) pre-tax transaction and integration-related costs of approximately $103.7 million, or $0.52 per diluted share, associated with the acquisition of Axiall; (2) pre-tax unabsorbed fixed manufacturing costs and other costs associated with the turnaround and expansion of the Lake Charles Petro 1 ethylene unit and other planned turnarounds and unplanned outages totaling approximately $155.1 million, or $0.77 per diluted share; and (3) lost sales associated with such turnarounds and outages; partially offset by (4) a realized gain of approximately $49.1 million from the previously held outstanding shares of common stock of Axiall; and (5) a lower effective tax rate of 24.8%. The 2016 tax rate was impacted by discrete items totaling $46.9 million, which decreased the tax provision for 2016. Net sales for the year ended December 31, 2016 increased $612.2 million to $5,075.5 million compared to net sales for the year ended December 31, 2015 of $4,463.3 million, primarily due to sales contributed by Axiall and higher sales volume for PVC resin, partially offset by lower sales prices for all our major products and lower sales volumes for our major olefins products. Income from operations was $581.5 million for the year ended December 31, 2016 as compared to $959.8 million for the year ended December 31, 2015, a decrease of $378.3 million. The decrease was mainly attributable to lower sales prices for all our major products, transaction and integration-related costs associated with the Axiall acquisition and the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the planned turnaround and expansion of the Lake Charles Petro 1 ethylene unit and other planned turnarounds and unplanned outages. The decrease in income from operations for the year ended December 31, 2016 was partially offset by lower average feedstock and energy costs and higher product margins at our European operations, as compared to the prior year.

"We are pleased with our earnings for 2016 despite lower sales prices following the decline in global crude oil prices and the impact on earnings due to major planned turnarounds," said Albert Chao, President and Chief Executive Officer. "We continue to benefit from solid demand for our products and, as we entered the new year, a rising price environment for our Olefins and Vinyls products. We believe the global demand trends are favorable for our products and that we are positioned to benefit from improving commodity prices which are supported by the continued recovery in crude oil prices. We are also making significant progress in integrating our recently acquired Axiall business and are working towards achieving the anticipated synergies."

Net cash provided by operating activities was $833.9 million for the full year 2016 and capital expenditures for the full year were $628.5 million. As of December 31, 2016, we had cash and cash equivalents of $620.0 million (including restricted cash of $160.5 million) and our total debt was $3,828.0 million.

EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $307.5 million for the fourth quarter of 2016 increased $56.3 million compared to EBITDA of $251.2 million reported in the fourth quarter of 2015. EBITDA for the fourth quarter of 2016 increased $125.4 million compared to EBITDA of $182.1 million in the third quarter of 2016. EBITDA for the year ended December 31, 2016 of $1,015.5 million decreased $228.4 million compared to EBITDA of $1,243.9 million for the year ended December 31, 2015. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release.

OLEFINS SEGMENT

The Olefins segment reported income from operations of $149.5 million in the fourth quarter of 2016, an increase of $10.8 million compared to income from operations of $138.7 million in the fourth quarter of 2015. The fourth quarter of 2016 benefited from record ethylene production following the expansion of our Lake Charles Petro 1 ethylene unit. Trading activity in the fourth quarter of 2016 resulted in a gain of $11.9 million as compared to a loss of $6.9 million in the fourth quarter of 2015.

The Olefins segment income from operations of $149.5 million for the fourth quarter of 2016 increased $31.0 million from the $118.5 million reported in the third quarter of 2016. The fourth quarter benefited from record ethylene production, partially offset by lower integrated olefins product margins. Trading activity in the fourth quarter of 2016 resulted in a gain of $11.9 million as compared to a loss of $7.8 million in the third quarter of 2016.

The Olefins segment reported income from operations of $557.8 million for the year ended December 31, 2016 as compared to income from operations of $747.4 million for the year ended December 31, 2015, a decrease of $189.6 million. This decrease was predominantly attributable to lower olefins integrated product margins, primarily as a result of lower sales prices as compared to 2015, and the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs related to the turnaround and expansion of the Lake Charles Petro 1 ethylene unit and other planned turnarounds and unplanned outages in 2016. Trading activity for 2016 resulted in a gain of $19.7 million as compared to a loss of $11.4 million in 2015.

VINYLS SEGMENT

The Vinyls segment reported income from operations of $37.6 million in the fourth quarter of 2016, a decrease of $14.0 million compared to income from operations of $51.6 million in the fourth quarter of 2015. This decrease was mainly attributable to lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with a major planned turnaround at our Lake Charles vinyls operations and the impact of selling higher cost Axiall inventory at fair value following the acquisition. This decrease was partially offset by higher sales prices for most of our major products.

The Vinyls segment income from operations of $37.6 million for the fourth quarter of 2016 increased $15.4 million from the $22.2 million reported in the third quarter of 2016. This increase was primarily due to higher caustic sales prices, higher sales volumes for most of our major products and sales contributed by Axiall, partially offset by lost sales, lower production rates and unabsorbed fixed manufacturing costs associated with a major planned turnaround at our Lake Charles vinyls facility.

The Vinyls segment reported income from operations of $174.1 million for the year ended December 31, 2016 as compared to income from operations of $254.5 million for the year ended December 31, 2015, a decrease of $80.4 million. This decrease was primarily driven by the lost sales, lower production rates, unabsorbed fixed manufacturing costs and other costs associated with the unplanned outage at our Calvert City facility and the planned turnaround at our Lake Charles vinyls operations. Income from operations for the year ended December 31, 2016 was also lower as a result of lower sales prices for our major products, partially offset by higher product margins at our European operations, as compared to 2015. In addition, income from operations for the year ended December 31, 2016 included the negative impact of selling higher-cost Axiall inventory recorded at fair value.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as statements regarding commodity prices and the integration of Axiall and related synergies are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: general economic and business conditions; the cyclical nature of the chemical industry; availability, cost and volatility of raw materials and utilities, including natural gas from shale production; the price of crude oil; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions, including environmental regulation; political unrest; industry production capacity and operating rates; the supply/demand balance for Westlake's products; competitive products and pricing pressures; access to capital markets; technological developments; the effect and results of litigation and settlements of litigation; operating interruptions; Westlake's ability to realize anticipated benefits of the Axiall acquisition and to integrate Axiall's business; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Westlake's Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the SEC in February 2016, and the risk factors in our other filings with the SEC.

Use of Non-GAAP Financial Measures

This release makes reference to certain "non-GAAP" financial measures, such as EBITDA, as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended. We report our financial results in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), but believe that certain non-GAAP financial measures, such as EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of the company's ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with U.S. GAAP. A reconciliation of EBITDA to reported net income and to net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Westlake Chemical Corporation Conference Call Information:

A conference call to discuss Westlake Chemical Corporation's fourth quarter and full year 2016 results will be held Tuesday, February 21, 2017 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). To access the conference call, dial (855) 760-8160, or (704) 288-0624 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 55515510.

A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on Tuesday, February 28, 2017. To hear a replay, dial (855) 859-2056, or (404) 537-3406 for international callers. The replay passcode is 55515510.

The conference call will also be available via webcast at: http://edge.media-server.com/m/p/cgaowosz and the earnings release can be obtained via the company's web page at: http://www.westlake.com/investor-relations.

(1) Industry pricing data was obtained from IHS Chemical. We have not independently verified the data.

(2) Represents average North American spot prices of ethylene over the period as reported by IHS Chemical.

(3) Represents average North American net transaction prices of polyethylene low density GP-Film grade over the period as reported by IHS Chemical.

(4) Represents average North American contract prices of styrene over the period as reported by IHS Chemical.

(5) Represents average North American undiscounted contract prices of caustic soda over the period as reported by IHS Chemical.

(6) Represents average North American contract prices of chlorine (into chemicals) over the period as reported by IHS Chemical.

(7) Represents average North American contract prices of PVC over the period as reported by IHS Chemical.

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170221005420r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170221005420/en/

SOURCE: Westlake Chemical Corporation


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