Westlake Chemical's Q1 Earnings Beat Ests - Analyst Blog

Specialty chemicals company Westlake Chemical Corp.'s WLK first-quarter 2014 earnings of $1.18 per share were above 92 cents per share earned in the year-ago quarter. The results also exceeded the Zacks Consensus Estimate of $1.13, reflecting a positive surprise of around 4.4%.

The company posted profit of $158 million in the reported quarter, surging roughly 28% from $123.3 million recorded in the prior-year quarter. The improvement came despite the unfavorable impact from elevated propane costs, severe winter weather conditions and the planned maintenance turnaround at Calvert City for the ethylene plant's feedstock conversion and expansion in the reported quarter.

Westlake saw higher olefins volumes and improved integrated product margins in the quarter, as higher selling prices more than offset the increase in feedstock and energy costs as compared with the last-year quarter.

Revenues came in at $1,027.7 million in the quarter, up roughly 19% from $864.6 million registered a year ago. It also surpassed the Zacks Consensus Estimate of $964 million. Westlake benefited from increased sales volumes for polyethylene and ethylene, higher selling prices for key products and contributions from its specialty PVC pipe business (acquired in May 2013) in the quarter.

Segment Performance

The Olefins segment's income from operations of $272.3 million zoomed 69% from $161.1 million registered a year ago. The results were positively impacted by higher olefin integrated product margins, higher polyethylene and ethylene sales volumes and improved production rates for key products.

Westlake reported an operating loss of $21.1 million for the Vinyls segment in the reported quarter, a decrease of $64.8 million from the operating income of $43.7 million in the prior-year quarter. The decrease was mainly attributable to lost sales, lower production rates, unabsorbed fixed manufacturing expense of $16.9 million, other costs related to the planned maintenance turnaround of the Calvert City production facilities and other planned maintenance activities. The segment was also negatively impacted by severe winter weather and significantly higher propane costs.

Financial Position

Westlake had cash and cash equivalents of $532.6 million as of Mar 31, 2014, down 31.5% from $777.9 million as of Mar 31, 2013. Long-term debt stood at $763.9 million as of Mar 31, 2014, flat on a year-over-year basis.

Net cash provided by operating activities was $212.5 million in the reported quarter compared with $116.3 million in the prior-year quarter. Capital expenditures were $110.7 million for the first quarter of 2014.

Westlake currently maintains a Zacks Rank #2 (Buy).

Other companies in the chemical-plastics space with a favorable Zacks Rank are A. Schulman, Inc. SHLM, Kraton Performance Polymers Inc. KRA and PolyOne Corporation POL. While A.Schulman retains a Zacks Rank #1 (Strong Buy), both Kraton and PolyOne hold a Zacks Rank #2 (Buy).