Petrochemicals and plastic products maker Westlake Chemical Corporation (WLK) Tuesday reported a rise in third-quarter earnings, which also surpassed Street estimates. Net sales for the quarter plunged from last year, mainly due to substantially lower sales prices for all major products.
For the third quarter, the Houston, Texas-based company's net earnings were $29.77 million or $0.45 per share compared to $27.36 million or $0.42 per share in the prior-year quarter.
On an average, six analysts polled by Thomson Reuters expected Westlake to earn $0.18 per share for the quarter. Analysts' estimates typically exclude special items.
Westlake stated that net income for the quarter benefited from lower effective income tax rate at 29% compared to 35% last year. The lower effective income tax rate resulted in a $2.5 million or $0.04 per share benefit to net income.
Net sales for the period plunged to $632.57 million from $1.07 billion in the third quarter of fiscal 2008, reflecting substantially lower sales prices for all major products. Analysts expected Westlake to generate revenues of $580.24 million for the quarter.
On a segmental basis, sales from Olefins was $440.97 million versus $725.06 million, and sales from Vinyls segment plummeted to $191.60 million from $348.67 million in the prior year.
Income from operations increased to $49 million from $48.8 million last year. Operating margins benefited from significantly lower energy and feedstock costs in the third quarter, which was mostly offset by lower sales prices and significantly lower caustic margins resulting from a 78% decrease in industry caustic prices compared to the third quarter of 2008, the company said.
President and chief executive officer Albert Chao said, "Olefins segment operating margins improved in the third quarter as increases in polyethylene prices outpaced the increase in feedstock costs. -- Vinyls segment operating results were negatively impacted by a significant drop in caustic prices and continued weakness in construction markets."
During the period, selling, general and administrative expenses incurred by the company rose slightly to $23.52 million from $23.00 million a year earlier.
For the nine-month period, the company's net income slumped to $40.54 million or $0.61 per share from $80.02 million or $1.22 per share in the last-year period. Year-to-date net sales were $1.70 billion versus $3.10 billion in the corresponding period prior year.
Looking ahead, Chao added, "We maintain a cautious outlook on the economy and as a result we continue to focus on controlling our costs, working capital and discretionary capital spending in order to conserve cash."
In Monday's regular trading session, WLK closed trading at $25.08 per share on the New York Stock Exchange. In the past 52-week period, the shares have been trading in a range of $10.30 to $28.22.
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