8-K
WESTLAKE CORP (WLK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): February 18, 2020
Westlake Chemical Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 001-32260 | 76-0346924 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission File Number) | (I.R.S. Employer<br><br>Identification No.) |
| 2801 Post Oak Boulevard, | Suite 600 | |
| --- | --- | --- |
| Houston, | Texas | 77056 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (713) 960-9111
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | WLK | The New York Stock Exchange |
| 1.625% Senior Notes due 2029 | WLK29 | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Item 2.02. Results of Operations and Financial Condition.
On February 18, 2020, Westlake Chemical Corporation (the "Company") issued a press release announcing its 2019 fourth quarter and full year results. A copy of the press release is furnished with this Current Report as Exhibit 99.1.
The information furnished pursuant to this Current Report, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed by Westlake Chemical Corporation under the Securities Act of 1933, as amended, unless specifically identified as being incorporated therein.
Item 7.01. Regulation FD Disclosure.
The Company is holding a conference call on February 18, 2020 to discuss its 2019 fourth quarter and full year results. Information about the call can be found in the press release furnished with this Current Report as Exhibit 99.1. In addition, the Company made available an investor presentation regarding its 2019 fourth quarter and full year results, which is furnished with this Current Report as Exhibit 99.2.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are furnished herewith:
99.1 Press release issued on February 18, 2020
104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WESTLAKE CHEMICAL CORPORATION | |||
|---|---|---|---|
| Date: | February 18, 2020 | By: | /S/ ALBERT CHAO |
| Albert Chao<br><br>President and Chief Executive Officer |
Exhibit
EXHIBIT 99.1
WESTLAKE CHEMICAL CORPORATION
Contact—(713) 960-9111
Investors—Steve Bender
Media— L. Benjamin Ederington
Westlake Chemical Corporation Reports Fourth Quarter and Full Year 2019 Results
•Record sales volumes in 2019
HOUSTON--(BUSINESS WIRE)-- Westlake Chemical Corporation (NYSE: WLK) (the "Company" or "Westlake") today reported net income attributable to Westlake for the three months ended December 31, 2019 of $72 million, or $0.56 per diluted share, on net sales of $1,883 million. Net income in the fourth quarter of 2019 decreased by $51 million compared to fourth quarter 2018 net income of $123 million, or $0.95 per share, on net sales of $1,995 million. Income from operations of $102 million for the fourth quarter of 2019 decreased by $105 million from income from operations of $207 million for the fourth quarter of 2018. The decreases in net income and income from operations versus the prior-year period were primarily due to lower global sales prices for our major products resulting from ongoing international trade uncertainties and slower global economic growth, partially offset by lower purchased ethylene, ethane feedstock and fuel costs. Net income for the fourth quarter of 2019 benefited from tax items of $29 million, or $0.22 per share, related to adjustments of international tax allowances and reserves. Restructuring, transaction and integration-related costs in the fourth quarter of 2019 were $5 million, or $0.03 per share.
Fourth quarter 2019 net income of $72 million, or $0.56 per diluted share, decreased by $86 million from third quarter 2019 net income of $158 million, or $1.22 per share. Income from operations of $102 million for the fourth quarter of 2019 decreased by $124 million from income from operations of $226 million for the third quarter of 2019. The decreases in net income and income from operations versus the prior quarter were primarily due to lower sales prices for our major products, higher feedstock and fuel costs, and seasonally lower earnings from our downstream vinyl products businesses, while net income benefited from the tax items referred to in the immediately preceding paragraph.
For full year 2019, net income of $421 million, or $3.25 per share, decreased by $575 million from 2018 net income of $996 million, or $7.62 per share. Income from operations for full year 2019 of $656 million decreased by $752 million from 2018 income from operations of $1,408 million. The decreases in net income and income from operations versus the prior year were primarily due to lower global sales prices for our major products, especially caustic soda and polyethylene, partially offset by lower purchased ethylene, ethane feedstock and fuel costs. Restructuring, transaction and integration-related costs for full year 2019 were pre-tax $37 million, or $0.23 per share.
"We experienced a difficult economic environment in 2019 as a result of slower global economic growth, which has been impacted by international trade tensions," said Albert Chao, President and Chief Executive Officer. "In this challenging environment, we remained disciplined by focusing on efficiently operating our facilities and investing in initiatives which further our chain integration, lower our cost position, and leverage our current products and footprint around the world. We believe we are well positioned in the market with many of our operations sitting on the lower end of the global cost curve and expect to drive long-term value for our stockholders."
Net cash provided by operating activities was $333 million for the fourth quarter of 2019 and $1,301 million for the full year of 2019. Capital expenditures for the fourth quarter of 2019 and for the full year of 2019 were $183 million and $787 million, respectively. As of December 31, 2019, cash and cash equivalents were $728 million and long-term debt was $3,445 million.
EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $296 million for the fourth quarter of 2019 decreased by $78 million compared to fourth quarter 2018 EBITDA of $374 million. Fourth quarter 2019 EBITDA of $296 million decreased by $129 million compared to third quarter 2019 EBITDA of $425 million. For the full year 2019, EBITDA of $1,407 million was $694 million lower than 2018 EBITDA of $2,101 million. A reconciliation of EBITDA to net income, income from operations, and net cash provided by operating activities can be found in the financial schedules at the end of this press release.
i
OLEFINS SEGMENT
Fourth quarter 2019 income from operations for the Olefins segment of $49 million decreased by $41 million from fourth quarter 2018 income from operations of $90 million. This decrease in income from operations versus the prior-year period was primarily due to lower sales prices for our major products as a result of increased olefins production from new industry capacity and higher impacts from turnaround activity, partially offset by lower feedstock and fuel costs.
Olefins income from operations of $49 million in the fourth quarter of 2019 decreased by $43 million from third quarter 2019 income from operations of $92 million. This decrease in income from operations versus the prior quarter was primarily due to lower margins resulting from lower polyethylene sales prices, higher feedstock and fuel costs, and higher impacts from turnaround activity.
For full year 2019, Olefins income from operations of $260 million decreased by $313 million from income from operations of $573 million for full year 2018. This decrease in income from operations versus the prior year was primarily due to lower sales prices for our major products as a result of increased olefins production from new industry capacity, partially offset by higher sales volumes for our major products and lower feedstock and fuel costs.
VINYLS SEGMENT
Fourth quarter 2019 income from operations for the Vinyls segment of $68 million decreased by $57 million from fourth quarter 2018 income from operations of $125 million. This decrease in income from operations versus the prior-year period was primarily due to lower global sales prices for caustic soda and PVC resin resulting from slower global economic growth and ongoing international trade uncertainties, partially offset by lower purchased ethylene, ethane feedstock and fuel costs, and contributions from the acquisitions completed in 2019 as well as our interest in the ethylene joint venture with Lotte Chemical in Lake Charles, Louisiana ("LACC").
Vinyls income from operations for the fourth quarter of 2019 of $68 million decreased by $85 million from third quarter 2019 income from operations of $153 million. The decrease in income from operations versus the prior-year period was primarily due to lower global sales prices for caustic soda and PVC resin, higher ethane feedstock and fuel costs, and seasonally lower earnings from our downstream vinyls products businesses, partially offset by higher sales volumes of PVC resin and higher contributions from LACC due to the incremental 34.8% interest acquired in October 2019.
For full year 2019, Vinyls income from operations of $451 million decreased by $462 million from income from operations of $913 million for full year 2018. This decrease in income from operations versus the prior year was primarily due to lower global sales prices for caustic soda and PVC resin, partially offset by lower purchased ethylene, ethane feedstock and fuel costs.
The statements in this release and the related teleconference relating to matters that are not historical facts, including driving long-term value for our stockholders, 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 and natural gas liquids 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 and changes in trade policies; 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; 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, 2018, which was filed with the SEC in February 2019.
ii
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. For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. 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 net income, income from operations and net cash provided by operating activities can be found in the financial schedules at the end of this press release.
Westlake Chemical Corporation
Westlake Chemical Corporation is an international manufacturer and supplier of petrochemicals, polymers and building products with its headquarters in Houston. Highly integrated along our olefins and vinyls product chains, the Company produces: ethylene; polyethylene; propylene; styrene; chlor-alkali and derivative products; PVC suspension and specialty resins; PVC compounds; building products, including pipe, fittings and specialty components, decking, roofing, siding, trim and molding, and window lineals; and PVC film. For more information, visit the Company's web site at www.westlake.com.
Westlake Chemical Corporation Conference Call Information:
A conference call to discuss Westlake Chemical Corporation's fourth quarter 2019 results will be held Tuesday, February 18, 2020 at 11:00 AM Eastern Time (10:00 AM 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 8467639.
A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on February 25, 2020. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 8467639.
The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/jnqbqhhd and the earnings release can be obtained via the Company's web page at: http://www.westlake.com/investor-relations.
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WESTLAKE CHEMICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| (In millions of dollars, except per share data) | ||||||||||||
| Net sales | $ | 1,883 | $ | 1,995 | $ | 8,118 | $ | 8,635 | ||||
| Cost of sales | 1,633 | 1,641 | 6,858 | 6,648 | ||||||||
| Gross profit | 250 | 354 | 1,260 | 1,987 | ||||||||
| Selling, general and administrative expenses | 115 | 108 | 458 | 445 | ||||||||
| Amortization of intangibles | 28 | 26 | 109 | 101 | ||||||||
| Restructuring, transaction and integration-related costs | 5 | 13 | 37 | 33 | ||||||||
| Income from operations | 102 | 207 | 656 | 1,408 | ||||||||
| Interest expense | (35 | ) | (30 | ) | (124 | ) | (126 | ) | ||||
| Other income (expense), net | 6 | (1 | ) | 38 | 52 | |||||||
| Income before income taxes | 73 | 176 | 570 | 1,334 | ||||||||
| Provision for (benefit from) income taxes | (12 | ) | 45 | 108 | 300 | |||||||
| Net income | 85 | 131 | 462 | 1,034 | ||||||||
| Net income attributable to noncontrolling interests | 13 | 8 | 41 | 38 | ||||||||
| Net income attributable to Westlake Chemical Corporation | $ | 72 | $ | 123 | $ | 421 | $ | 996 | ||||
| Earnings per common share attributable to Westlake Chemical Corporation: | ||||||||||||
| Basic | $ | 0.56 | $ | 0.95 | $ | 3.26 | $ | 7.66 | ||||
| Diluted | $ | 0.56 | $ | 0.95 | $ | 3.25 | $ | 7.62 |
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WESTLAKE CHEMICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| December 31, <br>2019 | December 31, <br>2018 | |||
|---|---|---|---|---|
| (In millions of dollars) | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 728 | $ | 753 |
| Accounts receivable, net | 1,036 | 1,037 | ||
| Inventories | 936 | 1,014 | ||
| Prepaid expenses and other current assets | 42 | 38 | ||
| Total current assets | 2,742 | 2,842 | ||
| Property, plant and equipment, net | 6,912 | 6,595 | ||
| Other assets, net | 3,607 | 2,165 | ||
| Total assets | $ | 13,261 | $ | 11,602 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities (accounts payable and accrued and other liabilities) | $ | 1,241 | $ | 1,183 |
| Long-term debt, net | 3,445 | 2,668 | ||
| Other liabilities | 2,172 | 1,675 | ||
| Total liabilities | 6,858 | 5,526 | ||
| Total Westlake Chemical Corporation stockholders' equity | 5,860 | 5,590 | ||
| Noncontrolling interests | 543 | 486 | ||
| Total equity | 6,403 | 6,076 | ||
| Total liabilities and equity | $ | 13,261 | $ | 11,602 |
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WESTLAKE CHEMICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Twelve Months Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| (In millions of dollars) | ||||||
| Cash flows from operating activities | ||||||
| Net income | $ | 462 | $ | 1,034 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 713 | 641 | ||||
| Deferred income taxes | 54 | 62 | ||||
| Net loss on disposition and others | 75 | 46 | ||||
| Other balance sheet changes | (3 | ) | (374 | ) | ||
| Net cash provided by operating activities | 1,301 | 1,409 | ||||
| Cash flows from investing activities | ||||||
| Acquisition of businesses, net of cash acquired | (314 | ) | — | |||
| Additions to property, plant and equipment | (787 | ) | (702 | ) | ||
| Additions to investments in unconsolidated subsidiaries | (862 | ) | (68 | ) | ||
| Other | 9 | 16 | ||||
| Net cash used for investing activities | (1,954 | ) | (754 | ) | ||
| Cash flows from financing activities | ||||||
| Dividends paid | (132 | ) | (120 | ) | ||
| Distributions to noncontrolling interests | (50 | ) | (45 | ) | ||
| Proceeds from debt issuance, net | 784 | — | ||||
| Proceeds from notes payable | 20 | 14 | ||||
| Net proceeds from issuance of Westlake Chemical Partners LP common units | 63 | — | ||||
| Redemption and repayment of notes payable | (18 | ) | (1,179 | ) | ||
| Repurchase of common stock for treasury | (30 | ) | (106 | ) | ||
| Other | (7 | ) | 9 | |||
| Net cash provided by (used for) financing activities | 630 | (1,427 | ) | |||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (2 | ) | (7 | ) | ||
| Net decrease in cash, cash equivalents and restricted cash | (25 | ) | (779 | ) | ||
| Cash, cash equivalents and restricted cash at beginning of the year | 775 | 1,554 | ||||
| Cash, cash equivalents and restricted cash at end of the year | $ | 750 | $ | 775 |
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WESTLAKE CHEMICAL CORPORATION
SEGMENT INFORMATION
(Unaudited)
| Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2018 | 2019 | 2018 | |||||||||
| (In millions of dollars) | ||||||||||||
| Net external sales | ||||||||||||
| Olefins | $ | 398 | $ | 493 | $ | 1,782 | $ | 2,019 | ||||
| Vinyls | 1,485 | 1,502 | 6,336 | 6,616 | ||||||||
| $ | 1,883 | $ | 1,995 | $ | 8,118 | $ | 8,635 | |||||
| Income (loss) from operations | ||||||||||||
| Olefins | $ | 49 | $ | 90 | $ | 260 | $ | 573 | ||||
| Vinyls | 68 | 125 | 451 | 913 | ||||||||
| Corporate and other | (15 | ) | (8 | ) | (55 | ) | (78 | ) | ||||
| $ | 102 | $ | 207 | $ | 656 | $ | 1,408 | |||||
| Depreciation and amortization | ||||||||||||
| Olefins | $ | 36 | $ | 36 | $ | 142 | $ | 138 | ||||
| Vinyls | 150 | 129 | 563 | 491 | ||||||||
| Corporate and other | 2 | 3 | 8 | 12 | ||||||||
| $ | 188 | $ | 168 | $ | 713 | $ | 641 | |||||
| Other income (expense), net | ||||||||||||
| Olefins | $ | 1 | $ | — | $ | 5 | $ | 4 | ||||
| Vinyls | — | 3 | 18 | 35 | ||||||||
| Corporate and other | 5 | (4 | ) | 15 | 13 | |||||||
| $ | 6 | $ | (1 | ) | $ | 38 | $ | 52 |
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WESTLAKE CHEMICAL CORPORATION
RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM
OPERATIONS AND NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
| Three Months Ended September 30, | Three Months Ended December 31, | Twelve Months Ended December 31, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2019 | 2019 | 2018 | 2019 | 2018 | |||||||||||
| (In millions of dollars) | |||||||||||||||
| Net cash provided by operating activities | $ | 501 | $ | 333 | $ | 254 | $ | 1,301 | $ | 1,409 | |||||
| Changes in operating assets and liabilities and other | (316 | ) | (228 | ) | (135 | ) | (785 | ) | (313 | ) | |||||
| Deferred income taxes | (19 | ) | (20 | ) | 12 | (54 | ) | (62 | ) | ||||||
| Net income | 166 | 85 | 131 | 462 | 1,034 | ||||||||||
| Less: | |||||||||||||||
| Other income (expense), net | 21 | 6 | (1 | ) | 38 | 52 | |||||||||
| Interest expense | (31 | ) | (35 | ) | (30 | ) | (124 | ) | (126 | ) | |||||
| (Provision for) benefit from income taxes | (50 | ) | 12 | (45 | ) | (108 | ) | (300 | ) | ||||||
| Income from operations | 226 | 102 | 207 | 656 | 1,408 | ||||||||||
| Add: | |||||||||||||||
| Depreciation and amortization | 178 | 188 | 168 | 713 | 641 | ||||||||||
| Other income (expense), net | 21 | 6 | (1 | ) | 38 | 52 | |||||||||
| EBITDA | $ | 425 | $ | 296 | $ | 374 | $ | 1,407 | $ | 2,101 |
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WESTLAKE CHEMICAL CORPORATION
SUPPLEMENTAL INFORMATION
Product Sales Price and Volume Variance by Operating Segments
| Fourth Quarter 2019 vs. Fourth Quarter 2018 | Fourth Quarter 2019 vs. Third Quarter 2019 | |||||||
|---|---|---|---|---|---|---|---|---|
| Average<br><br>Sales Price | Volume | Average<br><br>Sales Price | Volume | |||||
| Olefins | -18.7 | % | -0.7 | % | -4.5 | % | -6.9 | % |
| Vinyls | -10.0 | % | +9.0 | % | -3.3 | % | -4.8 | % |
| Company | -12.2 | % | +6.6 | % | -3.5 | % | -5.3 | % |
Average Quarterly Industry Prices ^(1)^
| Quarter Ended | |||||
|---|---|---|---|---|---|
| December 31, <br>2018 | March 31, <br>2019 | June 30, <br>2019 | September 30, <br>2019 | December 31, <br>2019 | |
| Average domestic prices | |||||
| Ethane (cents/lb) ^(2)^ | 11.6 | 10.0 | 7.1 | 5.8 | 6.3 |
| Propane (cents/lb) ^(3)^ | 18.7 | 15.7 | 12.8 | 10.3 | 11.8 |
| Ethylene (cents/lb) ^(4)^ | 20.2 | 17.0 | 13.7 | 20.7 | 22.8 |
| Polyethylene (cents/lb) ^(5)^ | 68.0 | 60.0 | 63.0 | 59.0 | 54.0 |
| Styrene (cents/lb) ^(6)^ | 84.3 | 78.8 | 80.8 | 79.9 | 77.1 |
| Caustic soda ($/short ton) ^(7)^ | 748 | 717 | 697 | 692 | 662 |
| Chlorine ($/short ton) ^(8)^ | 175 | 175 | 175 | 175 | 175 |
| PVC (cents/lb) ^(9)^ | 67.5 | 68.8 | 68.2 | 68.8 | 67.8 |
| Average export prices | |||||
| Polyethylene (cents/lb) ^(10)^ | 49.0 | 44.0 | 42.8 | 39.7 | 37.7 |
| Caustic soda ($/short ton) ^(11)^ | 349 | 314 | 283 | 275 | 219 |
| PVC (cents/lb) ^(12)^ | 34.3 | 36.0 | 35.0 | 35.1 | 33.6 |
________________
| (1) | Industry pricing data was obtained through IHS Markit ("IHS"). We have not independently verified the data. |
|---|---|
| (2) | Average Mont Belvieu spot prices of purity ethane over the period. |
| --- | --- |
| (3) | Average Mont Belvieu spot prices of non-TET propane over the period. |
| --- | --- |
| (4) | Average North American spot prices of ethylene over the period. |
| --- | --- |
| (5) | Average North American Net Transaction prices of polyethylene low density GP-Film grade over the period. |
| --- | --- |
| (6) | Average North American contract prices of styrene over the period. |
| --- | --- |
| (7) | Average USGC-CSLi index values for caustic soda over the period. As stated by IHS, "the caustic soda price listing represents the USGC-CSLi values. USGC-CSLi does not reflect contract price discounts, implementation lags, caps or other adjustments factors. Additionally, it is not intended to represent a simple arithmetic average of all market transactions occurring during the month. Rather, the USGC-CSLi is most representative of the month-to-month caustic soda price movement for contract volumes of liquid 50% caustic soda rather than the absolute value of contract prices at a particular point in time. It is intended to serve only as a benchmark." |
| --- | --- |
| (8) | Average North American contract prices of chlorine over the period. Effective January 1, 2019, IHS made a non-market average downward adjustment of $172.50 per short ton to chlorine prices. For comparability, we adjusted the prior period's chlorine price downward by $172.50 per short ton consistent with the IHS non-market adjustment. |
| --- | --- |
| (9) | Average North American contract prices of pipe grade polyvinyl chloride ("PVC") over the period. As stated by IHS, "the contract resin prices posted reflect an "index" or "market" for prices before discounts, rebates, incentives, etc." |
| --- | --- |
ix
| (10) | Average North American export price for low density polyethylene GP-Film grade over the period. |
|---|---|
| (11) | Average North American low spot export prices of caustic soda over the period. |
| --- | --- |
| (12) | Average North American spot export prices of PVC over the period. |
| --- | --- |
x
ex992investorpresentatio
Westlake Chemical Corporation Fourth Quarter and Year-End 2019 Earnings Presentation February 18, 2020
Westlake Chemical 2019 Highlights Business Highlights . Net income of $421 million; EBITDA of $1.4 billion; Cash flows from operations of $1.3 billion . Record annual sales volumes . Acquired NAKAN™, a global PVC compounding business – expanding Westlake’s international footprint and market channels . Started up 2.2 billion pound ethylene joint venture with Lotte Chemical (“LACC”) in the second quarter of 2019; increased ownership to 47% interest in the fourth quarter of 2019 . Issued €700,000,000 of senior unsecured notes due 2029 at a coupon of 1.625% per annum in July of 2019; proceeds used to acquire a greater interest in LACC . Completed 750 million pounds of PVC expansions in Germany and the U.S. – expansions should improve our chain integration and available chain margin . Westlake Chemical Partners acquired an additional 4.5% ownership interest in Westlake Chemical OpCo LP in the first quarter of 2019 2
Westlake Chemical 2020 Outlook Business Outlook . Chlor Alkali and PVC remains constructive o Integrated facilities in North America benefit from low cost feedstocks and natural gas o Outlook for demand growth outpaces industry capacity additions . LACC should provide a cost advantaged ethylene feedstock to drive vinyls integrated margins . Continued focus on controlling our costs . Improvement in integrated margins as current vinyls expansions near completion . Recent trade resolutions, such as the USMCA between the U.S., Mexico and Canada, as well as the Phase One agreement with China, spurred positive signs for global demand and improved pricing . With the outbreak of the Coronavirus, the magnitude of the impact on our products is not yet clear and will depend on the time period it takes for the Chinese and Global economy to return to normal 3
Westlake’s Commitment to Advancing Sustainability Westlake’s commitment to corporate social responsibility is formed by the company’s longstanding core values: . Health, Safety & Environmental - The vigilant stewardship of the environment and sustainability are of utmost importance and at the forefront of everything we do. . Our People - Support, develop and inspire our people to achieve their personal best and treat them with dignity and respect. . Quality & Continuous Improvement – An intensive practice of “never-ending process of improvement.” . Competitiveness - Providing innovative and useful products, maintaining high standards of customer service and operational excellence with a constant focus on managing costs. . Citizenship - Recognizing the importance of supporting the communities in which we work and live and make it a priority to take an active role in making these communities better. Protecting the Environment Westlake has numerous programs designed to promote safe, ethical, environmentally and socially responsible practices including: a worldwide recycling program, operating in an energy efficient manner that stabilizes the power grids and reducing water usage and emissions. Over the past five years, Westlake has reduced Sulphur Dioxide emissions to almost zero, reduced energy usage per ton of global production and achieved a nearly 30% reduction on CO2 emissions. Participating in Multi-Industry Associations for Environmental Protection Westlake is a proud partner with the following organizations to drive sustainable action to eliminate plastic waste, capture more flexible food packaging waste for recycling and support vinyls’ sustainable impact in the world, along with many other initiatives. 4
Westlake Chemical Corporation Fourth Quarter 2019 Financial Highlights 4Q 2019 vs. 4Q 2019 vs. FY 2019 vs. ($ in millions) 4Q 2019 3Q 2019 3Q 2019 4Q 2018 4Q 2018 FY 2019 FY 2018 FY 2018 Sales $1,883 $2,066 (9%) $1,995 (6%) $8,118 $8,635 (6%) Operating Income $102 $226 (55%) $207 (51%) $656 $1,408 (53%) Vinyls EBITDA $218 $306 (29%) $257 (15%) $1,032 $1,439 (28%) Olefins EBITDA $86 $128 (33%) $126 (32%) $407 $715 (43%) Corporate EBITDA ($8) ($9) 11% ($9) 11% ($32) ($53) 40% EBITDA¹ $296 $425 (30%) $374 (21%) $1,407 $2,101 (33%) Fourth Quarter 2019 vs. Fourth Quarter 2019 vs. Third Quarter 2019 Fourth Quarter 2018 – Lower sales prices for our major products – Lower global sales prices for our major – Higher feedstock and fuel costs products – Seasonally lower earnings from our + Lower ethane feedstock, purchased downstream vinyl products businesses ethylene and fuel costs + Higher sales volumes (1) Reconciliations of EBITDA, Vinyls EBITDA, Olefins EBITDA and Other EBITDA to the applicable GAAP measures can be found on pages 9, 10 and 11 5
Vinyls Segment Performance 4Q 2019 vs. 4Q 2019 vs. FY 2019 vs. ($ in millions) 4Q 2019 3Q 2019 3Q 2019 4Q 2018 4Q 2018 FY 2019 FY 2018 FY 2018 Sales $1,485 $1,618 (8%) $1,502 (1%) $6,336 $6,616 (4%) Operating Income $68 $153 (56%) $125 (46%) $451 $913 (51%) EBITDA $218 $306 (29%) $257 (15%) $1,032 $1,439 (28%) Fourth Quarter 2019 vs. Fourth Quarter 2019 vs. Third Quarter 2019 Fourth Quarter 2018 – Lower global sales prices for caustic soda – Lower sales prices for caustic soda and PVC and PVC resin resin – Higher feedstock and fuel costs + Higher sales volumes – Seasonally lower earnings from vinyls + Lower feedstock and fuel costs products + Contribution from LACC + Higher sales volumes of PVC resin and higher contribution from LACC Vinyls Segment Vinyls Segment 4Q 2019 vs. 3Q 2019 4Q 2019 vs. 4Q 2018 Average Average Sales Price Volume Sales Price Volume -3.3% -4.8% -10.0% + 9.0% 6
Olefins Segment Performance 4Q 2019 vs. 4Q 2019 vs. FY 2019 vs. ($ in millions) 4Q 2019 3Q 2019 3Q 2019 4Q 2018 4Q 2018 FY 2019 FY 2018 FY 2018 Sales $398 $448 (11%) $493 (19%) $1,782 $2,019 (12%) Operating Income $49 $92 (47%) $90 (46%) $260 $573 (55%) EBITDA $86 $128 (33%) $126 (32%) $407 $715 (43%) Fourth Quarter 2019 vs. Fourth Quarter 2019 vs. Third Quarter 2019 Fourth Quarter 2018 – Lower polyethylene sales prices – Lower sales prices for our major products – Higher feedstock and fuel costs – Impact from turnaround activity – Impact from turnaround activity + Lower feedstock and fuel costs + Higher polyethylene sales volumes Olefins Segment Olefins Segment 4Q 2019 vs. 3Q 2019 4Q 2019 vs. 4Q 2018 Average Average Sales Price Volume Sales Price Volume -4.5% -6.9% -18.7% -0.7% 7
Financial Reconciliations
Consolidated Statements of Operations Three Months Ended Three Months Ended December 31, Twelve Months Ended December 31, September 30, 2019 2019 2018 2019 2018 (In millions of dollars, except per share data) Net sales $ 2,066 $ 1,883 $ 1,995 $ 8,118 $ 8,635 Cost of sales 1,695 1,633 1,641 6,858 6,648 Gross profit 371 250 354 1,260 1,987 Selling, general and administrative expenses 110 115 108 458 445 Amortization of intangibles 27 28 26 109 101 Restructuring, transaction and integration-related costs 8 5 13 37 33 Income from operations 226 102 207 656 1,408 Interest expense (31) (35) (30) (124) (126) Other income (expense), net 21 6 (1) 38 52 Income before income taxes 216 73 176 570 1,334 Provision for (benefit from) income taxes 50 (12) 45 108 300 Net income 166 85 131 462 1,034 Net income attributable to noncontrolling interests 8 13 8 41 38 Net income attributable to Westlake Chemical Corporation $ 158 $ 72 $ 123 $ 421 $ 996 Earnings per common share attributable to Westlake Chemical Corporation: Basic $ 1.22 $ 0.56 $ 0.95 $ 3.26 $ 7.66 Diluted $ 1.22 $ 0.56 $ 0.95 $ 3.25 $ 7.62 9
Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities Three Months Ended September 30, Three Months Ended December 31, Twelve Months Ended December 31, 2019 2019 2018 2019 2018 (In millions of dollars) Net cash provided by operating activities $ 501$ 333$ 254$ 1,301$ 1,409 Changes in operating assets and liabilities and other (316) (228) (135) (785) (313) Deferred income taxes (19) (20) 12 (54) (62) Net income 166 85 131 462 1,034 Less: Other income (expense), net 21 6 (1) 38 52 Interest expense (31) (35) (30) (124) (126) (Provision for) benefit from income taxes (50) 12 (45) (108) (300) Income from operations 226 102 207 656 1,408 Add: Depreciation and amortization 178 188 168 713 641 Other income (expense), net 21 6 (1) 38 52 EBITDA $ 425 $ 296 $ 374 $ 1,407 $ 2,101 10
Reconciliation of Vinyls, Olefins and Corporate EBITDA to Applicable Operating Income (Loss) Three months ended September 30, Three months ended December 31, Twelve months ended December 31, (in $ millions) 2019 2019 2018 2019 2018 Vinyls EBITDA $306 $218 $257 $1,032 $1,439 Less: Depreciation and Amortization 141 150 129 563 491 Other Income 12 - 3 18 35 Vinyls Operating Income 153 68 125 451 913 Olefins EBITDA 128 86 126 407 715 Less: Depreciation and Amortization 35 36 36 142 138 Other Income 1 1 - 5 4 Olefins Operating Income 92 49 90 260 573 Corporate EBITDA (9) (8) (9) (32) (53) Less: Depreciation and Amortization 2 2 3 8 12 Other Income 8 5 (4) 15 13 Corporate Operating Loss (19) (15) (8) (55) (78) Vinyls Operating Income 153 68 125 451 913 Olefins Operating Income 92 49 90 260 573 Corporate Operating Loss (19) (15) (8) (55) (78) Total Operating Income $226 $102 $207 $656 $1,408 11
Quarterly Industry Pricing
Average Quarterly Industry Prices (1) Quarter Ended December 31, March 31, June 30, September 30, December 31, 2018 2019 2019 2019 2019 Average domestic prices Ethane (cents/lb) (2) 11.6 10.0 7.1 5.8 6.3 Propane (cents/lb) (3) 18.7 15.7 12.8 10.3 11.8 Ethylene (cents/lb) (4) 20.2 17.0 13.7 20.7 22.8 Polyethylene (cents/lb) (5) 68.0 60.0 63.0 59.0 54.0 Styrene (cents/lb) (6) 84.3 78.8 80.8 79.9 77.1 Caustic soda ($/short ton) (7) 748 717 697 692 662 Chlorine ($/short ton) (8) 175 175 175 175 175 PVC (cents/lb) (9) 67.5 68.8 68.2 68.8 67.8 Average export prices Polyethylene (cents/lb) (10) 49.0 44.0 42.8 39.7 37.7 Caustic soda ($/short ton) (11) 349 314 283 275 219 PVC (cents/lb) (12) 34.3 36.0 35.0 35.1 33.6 1) Industry pricing data was obtained through IHS Markit ("IHS"). We have not independently verified the data. 2) Average Mont Belvieu spot prices of purity ethane over the period. 3) Average Mont Belvieu spot prices of non-TET propane over the period. 4) Average North American spot prices of ethylene over the period. 5) Average North American Net Transaction prices of polyethylene low density GP-Film grade over the period. 6) Average North American contract prices of styrene over the period. 7) Average USGC-CSLi index values for caustic soda over the period. As stated by IHS, "the caustic soda price listing represents the USGC-CSLi values. USGC-CSLi does not reflect contract price discounts, implementation lags, caps or other adjustments factors. Additionally, it is not intended to represent a simple arithmetic average of all market transactions occurring during the month. Rather, the USGC-CSLi is most representative of the month-to-month caustic soda price movement for contract volumes of liquid 50% caustic soda rather than the absolute value of contract prices at a particular point in time. It is intended to serve only as a benchmark." 8) Average North American contract prices of chlorine over the period. Effective January 1, 2019, IHS made a non-market average downward adjustment of $172.50 per short ton to chlorine prices. For comparability, we adjusted the prior period's chlorine price downward by $172.50 per short ton consistent with the IHS non-market adjustment. 9) Average North American contract prices of pipe grade polyvinyl chloride ("PVC") over the period. As stated by IHS, "the contract resin prices posted reflect an "index" or "market" for prices before discounts, rebates, incentives, etc." 10) Average North American export price for low density polyethylene GP-Film grade over the period. 11) Average North American low spot export prices of caustic soda over the period. 12) Average North American spot export prices of PVC over the period. 13
Safe Harbor Language This presentation contains certain forward-looking statements including statements regarding the results of projects, demand growth outpacing industry capacity additions, improvement in integrated margins and LACC providing a cost advantaged ethylene feedstock to drive strong vinyls chain margins. Actual results may differ materially depending on factors such as general economic and business conditions; the cyclical nature of the chemical industry; the availability, cost and volatility of raw materials and energy; uncertainties associated with the United States, Europe and worldwide economies, including those due to political tensions in the Middle East and elsewhere; current and potential governmental regulatory actions in the United States and Europe and regulatory actions and political unrest in other countries; industry production capacity and operating rates; the supply/ demand balance for our products; competitive products and pricing pressures; instability in the credit and financial markets; access to capital markets; terrorist acts; operating interruptions including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks; changes in laws or regulations; technological developments; our ability to implement our business strategies; creditworthiness of our customers; and other factors described in our reports filed with the Securities and Exchange Commission. Many of these factors are beyond our ability to control or predict. Any of these factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements. Every forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. Investor Relations Contacts Steve Bender Jeff Holy Executive Vice President & Vice President & Chief Financial Officer Treasurer Westlake Chemical 2801 Post Oak Boulevard, Suite 600 Houston, Texas 77056 713-960-9111 14