Westlake Chemical's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Westlake Chemical Corporation ( WLK)

Q4 2011 Earnings Call

February 21, 2012 11:00 AM ET


David Hansen – VP, Administration

Albert Chao – President and CEO

Steve Bender – SVP and CFO


Kevin McCarthy – Bank of America

Brian Maguire – Goldman Sachs

Jeff Zekauskas – JPMorgan

Don Carson – Susquehanna Financial

Frank Mitsch – Wells Fargo Securities

Gregg Goodnight – UBS

Bill Kavaler – Oscar Gruss



Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Corporation’s Fourth Quarter 2011 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. After the speakers’ remarks you will be invited to participate in a question-and-answer session. As a reminder, ladies and gentlemen, this conference is being recorded today February 21, 2012.

I would now like to turn the call over to today’s host, Dave Hansen, Westlake’s Senior Vice President of Administration. Sir, you may begin.

David Hansen

Thank you very much, and good morning everyone, and thank you for joining us for the Westlake Chemical Corporation’s fourth quarter conference call. I am joined today by Albert Chao, our President and CEO; Steve Bender, our Senior Vice President and Chief Financial Officer; and other members of our management team. The agenda for today will be as follows: Albert, will first make a few comments regarding Westlake’s performance and the strategic initiatives we have under way. Steve, will then provide you with a more detailed look at our financial and operating results. Albert, will have a few concluding comments and then, we’ll open up the call for questions.

Today, management is going to discuss certain topics that will contain forward-looking information that is based on management’s beliefs as well as assumptions made by and information currently available to management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. Actual results could differ materially based upon factors including, the cyclical nature of the chemical industry; availability, cost, and volatility of raw materials, energy and utilities; governmental regulatory actions and political unrest; global economic conditions; industry operating rates; the supply/demand balance for Westlake’s products; competitive products and pricing pressures; access to capital markets; technological developments; and other risk factors.

As you are probably aware, we have submitted a proposal to Georgia Gulf Corporation to acquire all of its outstanding shares for $35 per share. During our prepared remarks, we will briefly comment on the Georgia Gulf proposal. During this conference call, we will not respond to any callers’ questions regarding Georgia Gulf. Please note that our communication today does not constitute an offer to sell or the solicitation of an offer to buy any securities. No tender offer for the shares of Georgia Gulf has been made at this time. If and when a tender offer is made, we will file relevant materials with the SEC.

Westlake issued earlier this morning a press release with details of our quarterly financial and operating results. This document is available in the Press Release section of our webpage at westlake.com. A replay of today’s call will be available beginning two hours after completion of this call until 1:00 P.M. Eastern Time on February 28, 2012. The replay may be accessed by dialing the following numbers: domestic callers should dial 1-888-286-8010; international callers may access the replay at 617-801-6888. The access code for both numbers is 75680375. Please note that the information reported on this call speaks only as of today, February 21, 2012. And therefore you are advised that time sensitive information may no longer be accurate as of the time of any replay.

I would finally advise you that this conference call is being broadcast live through an internet webcast system that can be accessed at our webpage at westlake.com.

Now, I’d like to turn the call over to Albert Chao. Albert?

Albert Chao

Thank you, Dave. Good morning, ladies and gentlemen, and thank you for joining us. The year 2011 has proved to be another successful and strategically important year for Westlake. We celebrated our 25th anniversary in 2011 by achieving record earnings. Our record earnings of $259 million or $3.87 per share in 2011 grew by 17% year-over-year driven by improved Vinyls margins and continued strong performance from our Olefins segment.

The fourth quarter presented the industry with a challenging environment as ethane feedstock prices increased compared to the previous quarter and seasonal destocking across the supply chain caused derivative prices to fall early in the quarter. During the year, Westlake embarked on a series of capital expenditures that would expand our integration, reduce our production costs, and boost earnings into the future. These backward integration projects will expand the company’s capacity in ethane-based ethylene and in chlorine and caustics which will complete upstream integration in our Vinyls chain.

The significant investments we are making using our existing cash resources demonstrates our confidence and optimism about the future of our Olefins and Vinyl businesses. Our ethane-based ethylene plants will benefit from the expanding supply of ethane from shale gas production in North American and the development of infrastructure necessary to deliver this lower cost feedstock to our plants. In 2012, we will complete one of two expansion programs with increased ethane-based capacity of our ethylene crackers in Lake Charles, Louisiana with a second expansion plant for completion in 2014.

We’ll be fully integrated chlorine feedstock with the completion of our chlor-alkali facility in 2013, and we are continuing our engineering study, convert our propane-based ethylene cracker in Calvert City, Kentucky to ethane by 2014 to take advantage of the larger volume of ethane coming from the Marcellus and Utica shale plays. These projects will take advantage of the ethane pipeline infrastructure that will bring ethane on the Marcellus and other shale areas through Lake Charles and Calvert City.

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