Westlake to Boost Ethylene Capacity (DOW) (WLK)

Specialty chemicals company Westlake Chemical Corporation (WLK) recently said that it will execute the planned maintenance and expansion of its Petro 2 ethylene unit in the first quarter of 2013.

The move, which supports the Texas-based company's ethylene integration strategy, is expected to expand ethane-based ethylene capacity by roughly 230 million to 240 million pounds a year. The Petro 2 ethylene unit, which is housed in Westlake’s Lake Charles, Louisiana, complex, is expected to be down for about 50 days for the ethane cracker expansion work.

Westlake is an international manufacturer and supplier of petrochemicals, polymers and building products. It competes with The Dow Chemical Company (DOW) among others.

Westlake released its second quarter results in August 2012. Its adjusted earnings (excluding pre-tax gains) of $1.59 per share topped the Zacks Consensus Estimate of $1.41. Profit, as reported, jumped nearly 43% year over year to $115.5 million or $1.72 per share.

Revenues, however, dipped 1.2% year over year to $914 million, missing the Zacks Consensus Estimate of $933 million. The decline was due to a drop in selling prices for a number of Westlake’s key products along with lower sales volume for PVC resin and building products. However, higher olefins and feedstock sales volumes prevented revenues from sliding further.

Westlake’s Olefins and Vinyls segments saw higher profits in the quarter, aided by lower cost feedstock on the back of favorable ethane and propane prices, arising from the strong North American shale gas production. The company’s Olefins business put up a strong performance, posting record quarterly income from operations.

The company’s Petro 1 and Petro 2 units experienced small operational outage in the second quarter. Financial impact of the outage was roughly $15 million. The company, in its second quarter call, noted that it plans to commence a second ethane cracker expansion at Lake Charles in 2015.

Westlake currently holds a Zacks #3 Rank, reflecting a short-term (1 to 3 months) Hold rating.