Third quarter 2007 results were favorably impacted by the utilization of the first-in, first-out (FIFO) inventory accounting method as compared with utilizing the last-in, first-out (LIFO) method used by some companies in the industry. This was due primarily to rising feedstock costs.
Third quarter 2007 net income increased $0.4 million, or $0.01 per diluted share, from the $37.9 million net income, or $0.58 per diluted share, reported in the second quarter of 2007. Third quarter income from operations decreased $2.5 million from the $62.3 million reported in the second quarter of 2007, while net sales increased by $57.5 million from the $782.7 million reported in the second quarter of 2007.
The increase in sales was primarily due to higher selling prices for polyethylene, caustic and PVC resin which were partially offset by lower sales volumes for polyethylene and PVC pipe. Income from operations was down slightly as higher selling prices and margins in the Olefins segment was offset by lower margins in the Vinyls segment.
Vinyls segment margins declined in the third quarter of 2007 as compared to the second quarter primarily due to the industry's inability to raise prices sufficiently in downstream products in order to offset increased feedstock costs and the impact of the legal settlement of the litigation with PolyOne and Goodrich and associated legal expenses.
The Olefins segment, however, has gained strength since the beginning of 2007 primarily due to balanced industry supply and demand fundamentals for polyethylene and strong export demand. Income from operations in the second quarter of 2007 was negatively impacted by a scheduled turnaround at one of the ethylene units in Lake Charles, Louisiana, which was down approximately 30 days.
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Westlake Chemical Corporation
marketing@alchempro.com
