Westlake Chemical Corporation Q2 2010 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : Yes, good morning. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : Albert, first of all, congratulations on very good quarterly results here, particularly in ethylene and polyethylene. I want to ask you about Vinyls though. So, it looks like volumes improved sequentially, caustic prices up, ethylene prices down. Why did you not see a greater sequential improvement in profitability in the quarter, would you say?

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : So just a follow-up. If I look at CMAI benchmark numbers for example, they have ethylene prices down, it looks like $0.06 or $0.07 sequentially in 2Q versus 1Q, but am I understanding correctly that your cost did not go down?

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : I see. Okay, thank you. Then maybe Albert a broader question, if I may. Your net debt level, it looks like it's the lowest since 2006. What are your latest thoughts with regard to uses of cash flow and particularly any opportunities that you might see for M&A in the private market these days?

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : Okay. And then finally if I may for Steve, you mentioned you had a $0.17 headwind from FIFO in the quarter. I was a little bit surprised to hear that. Perhaps you could comment on how much feedstock inventory you keep. I wouldn't have thought that that would create such a swing.

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : Okay, very good. Thank you very much.

Question: Frank Mitsch - BB&T Capital Markets - Analyst : Good morning and congrats on a record Olefins quarter.

Question: Frank Mitsch - BB&T Capital Markets - Analyst : Just to follow up on Kevin's question. Obviously $0.17 FIFO negative Q2. What, as you stand here today on August 3rd, what's your thoughts on FIFO plus/minus neutral in Q3?

Question: Frank Mitsch - BB&T Capital Markets - Analyst : If the quarter ended today, what would the number be roughly?

Question: Frank Mitsch - BB&T Capital Markets - Analyst : All right, that's what I thought, all right, great. And speaking of trending down, obviously you guys benefited from the lower ethane price out there, and Albert, it sounded from your comments, you obviously expect that to continue in the third quarter. Can you talk a little bit longer about the sustainability of low ethane relative to nat gas or naphtha going forward, thoughts on 2011 in that regard?

Question: Frank Mitsch - BB&T Capital Markets - Analyst : All right. So, this is -- from your perspective, this is a sustainable advantage that Westlake has?

Question: Frank Mitsch - BB&T Capital Markets - Analyst : Terrific. And speaking of expansions, what are your latest and greatest thoughts on possible chlor-alkali expansion plants?

Question: Frank Mitsch - BB&T Capital Markets - Analyst : And when would you anticipate a go, no-go decision?

Question: Frank Mitsch - BB&T Capital Markets - Analyst : Okay, all right. Thank you so much.

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Hi, good morning.

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Hi. Your working capital use from the first half was about $90 million. Where do you think we will stand by the end of the year, all things being equal?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Well, it seems your receivables are just up a lot, I mean your inventories haven't really moved all that much?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : So I take that you think that that number will come down toward the end of the year, is that the idea? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Okay, so you don't have an opinion on it?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Okay. Why were your Olefins volumes down sequentially?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : So, it said it was down a couple of percent, so I guess the meaning of that is you are operating at sort of about as high a rate as you can plus or minus a tiny bit, is that the idea?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Yes? Okay. You said your CapEx I think was $100 million to $120 million, but you spent $30 million in the first half, so...?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : So for the six months though, you've spent $30 million right? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : So, how are you going to get, I don't know $60 million to 80 million spent in the second half, can you do that?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Okay. Can you talk about what went especially well in Vinyls in the second quarter and what went especially weakly for you, or where were you surprised on the positive side and on the negative side, as far as particular parts of your Vinyls operation?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Are you weighing any ethylene or polyethylene capacity expansions?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : And then, lastly, in terms of the acquisition environment, are there interesting properties on the market or it's not so interesting and if you got something, what is the size of things you are looking at? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Okay, good. Thanks very much.

Question: Charles Neivert - Dahlman Rose - Analyst : Good morning.

Question: Charles Neivert - Dahlman Rose - Analyst : Quick question. I guess you talked about the fact that polyethylene exports were doing well from the US, it was helping to support numbers. Were you guys any larger participant than you've been in the recent past? I know historically, or less recently, you guys haven't done too much in the way of exporting. Has that increased at all or is it still mostly a domestic sale situation?

Question: Charles Neivert - Dahlman Rose - Analyst : Okay. And that hasn't really changed in any significant way in the last few quarters?

Question: Charles Neivert - Dahlman Rose - Analyst : Okay. And then, if I was looking at the Olefin margin from 2Q into 3Q, the whole chain margin, are we looking at likely to be a little bit of -- I mean let's just make the assumption that the September hike goes through just give it to you for now. But under that circumstance would we be looking at a compression or flat or may be a slight increase in the chain margin based on where we are versus 2Q?

Question: Charles Neivert - Dahlman Rose - Analyst : Okay. That's it on my side, thank you.

Question: David Begleiter - Deutsche Bank - Analyst : Thank you, good morning.

Question: David Begleiter - Deutsche Bank - Analyst : Albert, on your Vinyls business, do you expect to be profitable in either Q3 or Q4?

Question: David Begleiter - Deutsche Bank - Analyst : Fair enough. And on the $0.05 September increase, what do you think the industry needs to get that price increase through? How much more -- is it demand, is it outages, what's required for the $0.05 increase to be effective? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: David Begleiter - Deutsche Bank - Analyst : And lastly on the caustic price increase where do you stand in getting the full $80 per ton increase?

Question: David Begleiter - Deutsche Bank - Analyst : Thank you.

Question: Bill Hoffmann - RBC Capital Markets - Analyst : Yes, good morning.

Question: Bill Hoffmann - RBC Capital Markets - Analyst : Albert, I wondered if you could talk a little about the Vinyls demand sort of on a month-by-month basis through the summer. We've got a sense that the demand level sort of dropped off precipitously coming into June, I just wonder what you were seeing in July in the Vinyls business? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Bill Hoffmann - RBC Capital Markets - Analyst : Okay. I mean -- but it's our sense though that one, it's more than seasonal declines, do have any sense of that at this point?

Question: Bill Hoffmann - RBC Capital Markets - Analyst : Okay, thanks. And then just regards to the Olefins business, would your price increase on the LDPE, just sort of curious what you are hearing sort of -- I know you don't participate in the other segments as much, but I guess it's our thought that we will continue to see pricing pressure in HDPE and LLDPE as this facilities come online. So I just wondered what anecdotally you are hearing about competitive substrates that way?

Question: Bill Hoffmann - RBC Capital Markets - Analyst : Great, okay. Thank you. And then Steve, just a question on the capital spend in the second half of the year. Can you just give us a sense of what that's focused on, is any of that sort of pre-work for the Vinyls -- core Vinyls expansion?

Question: Bill Hoffmann - RBC Capital Markets - Analyst : Okay. Thanks.

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Thanks. You've talked about the FIFO headwind, I think at $0.17, can you divide that up roughly between the two divisions?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Okay. And then lastly, have you seen resin buyers held back purchases because -- the customers are watching ethylene prices fall and waiting for lower resin prices, or do you think that's not a factor?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Do you think there might be a step-up in PVC volume in the third quarter because of that?

Question: Jeff Zekauskas - JPMorgan Securities, Inc. - Analyst : Yes. Okay, great. Thank you very much.

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : Yes. Albert, has there been any meaningful change in your negotiations in Trinidad over the past three months or so that you care to comment on?

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : Would you describe the project as dormant at this point or do you still think that there is a meaningful chance you would elect to proceed with that project over the next year or so?

Question: Kevin McCarthy - BofA Merrill Lynch - Analyst : Okay. Thank you very much.