MOSCOW (MRC) -- Westlake reported second-quarter net income of USD15 million, down 87.4% year-on-year (YOY), on net sales down 20.3%, to USD1.71 billion. Earnings totaled 11 cents/share, beating analysts’ consensus estimate of 0 cents/share, as reported by Refinitiv (New York, New York), said Chemweek.
Demand declined in the quarter, as did prices, for caustic soda and downstream vinyl products, as a result of the COVID-19 pandemic and the drop in oil prices. "The second quarter of 2020 was challenging as we navigated the global COVID-19 pandemic, which significantly reduced global demand for our products, as well as a sharp decline in global oil prices,” says Westlake president and CEO Albert Chao.
Vinyls segment sales declined 19.1% YOY, to USD1.35 billion, while segment operating income was down 84.5%, to $20 million. “This decrease in income from operations versus the prior-year period was primarily due to the continued impact of COVID-19 and a sharp drop in global oil prices, which led to lower global sales prices for our major products and lower sales volumes for caustic soda and downstream vinyl products,” Westlake says.
Olefins segment sales fell 24.3% YOY, to $361 million, while segment operating income was down 69.5%, to USD25 million. “This decrease in income from operations versus the prior-year period was primarily due to lower sales prices for polyethylene resulting from the impact of COVID-19 and the drop in global oil prices, which were partially offset by higher polyethylene sales volumes and lower feedstock and fuel costs,” Westlake says.
Partially offsetting the lower prices and volumes were lower ethane feedstock and fuel costs, reduced operating and selling, general and administrative expenses as well as lower costs associated with planned turnarounds. “We are confident that Westlake is well positioned to continue to serve the needs of our customers while managing working capital, lowering our operating costs and reducing capital expenditures,” said CEO Albert Chao.
The improvement was due to higher earnings on ethylene sold to Westlake Chemical from Westlake Chemical OpCo LP (OpCo) and lower manufacturing and selling, general and administration costs, partially offset by lower ethylene production. Westlake Chemical Partners owns a 22.8% interest in OpCo, which has three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana and an ethylene pipeline.
In February 2018, as MRC informed before, Westlake Chemical announced plans to expand its capacities for the production of PVC and VCM at three of its chemical facilities. Two of the plants are located in Germany (Burghausen, Gendorf) and one is located in Geismar, Louisiana. The expansions in Burghausen and Geismar are expected to be completed in 2019. The Gendorf expansions are expected to be completed in 2020 and 2021.
Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.