Westlake Chemical Corporation. Houston Chemical Intensity Day Goldman Sachs March 24, 2009

Transcription

1 Westlake Chemical Corporation Houston Chemical Intensity Day Goldman Sachs March 24, 2009

2 SAFE HARBOR LANGUAGE This presentation may include forward-looking statements, as defined in the Private Securities Litigation Reform Act of 1995, reflecting management s current analysis and expectations, based on reasonable assumptions. Results could differ materially depending on such factors as business climate, business performance, economic and competitive uncertainties, ability to execute work process redesign and reduce costs, failure to complete transactions or to achieve benefit from transactions, higher manufacturing costs, change in strategies, reduced level of customer orders, risks in developing new products and technologies, adverse legal and regulatory developments including increases in the number or financial exposures of claims, lawsuits, settlements or judgments, or the inability to eliminate or reduce such financial exposures by collecting indemnity payments from insurers, environmental and safety regulations and clean-up costs, foreign exchange rates, and adverse changes in economic and political climates around the world. Accordingly, there can be no assurance that the Company will meet future results, performance or achievements expressed or implied by such forward-looking statements. As appropriate, additional factors are contained in reports filed with the Securities and Exchange Commission. This paragraph is included to provide safe harbor for forward-looking statements, which are generally not required to be publicly revised as circumstances change. Investor Relations Contact Steven Bender Sr. Vice President, Chief Financial Officer & Treasurer Westlake Chemical Corporation 2801 Post Oak Boulevard, Suite 600 Houston, Texas

3 $ 3.7 BILLION INTEGRATED POLYMERS MATERIALS COMPANY Westlake Chemical Corporation Sales $ 3.7 B EBITDA (1) $ 88 MM Net Loss (FYE 2008) $(30) MM Olefins Business Ethylene LDPE LLDPE & HDPE Styrene Vinyls Business (2) PVC VCM Chlorine Caustic Soda Ethylene Fabricated Products 69% of Sales, $2.5 B 2.50 Blbs 1.50 Blbs 980 MMlbs 570 MMlbs 31% of Sales, $1.1 B 2.00 Blbs 1.85 Blbs 550 MMlbs 605 MMlbs 450 MMlbs 1.10 Blbs (1) Non-GAAP financial measure (2) Capacities include China JV 3

4 OLEFINS INTEGRATION POSITIONED FOR THE CYCLE Current: Full Utilization of Ethylene Purchased Ethylene Polyethylene, 70% 450 million lbs 2.50 billion lbs Ethylene Styrene, 4% 2.95 billion lbs 570 million lbs 100% CAPTIVE PRODUCTION VCM, 26% 1.85 billion lbs Positioned for the cycle; can curtail ethylene purchases yet run Westlake plants at high rates Enhanced margin stability; higher profits Improved level of integration Opportunity to debottleneck in the future 4

5 HIGHER OPERATING RATES vs. PEERS, PARTICULARLY IN TROUGH YEARS Ethylene Operating Rates (1) Westlake Advantage over Industry Peers 100 Industry Westlake Operating Rate Advantage vs. Peers %, operating rate year, avg. ( ) 3.3% 70 Trough Years, avg. ( ) 4.3% Higher operating rates, particularly in trough years Operating culture; execution; integration; newer assets Source: CMAI and Westlake (1) Includes the impact of Hurricane Katrina and Rita in

6 20 LAKE CHARLES FEEDSTOCK FLEXIBILITY TO HELP OPTIMIZE MARGINS Westlake has enhanced flexibility to switch ethylene feedstocks, since no one feedstock is always advantaged. Ethylene Margin Trend for Light and Heavy Feed Crackers the U.S. 16 Forecast Cents / lb Source: CMAI Naptha Cash Margin Ethane Cash Margin E 2012E 6

7 WESTLAKE S FAVORABLE POLYETHYLENE PRODUCT MIX vs. PEERS 2008 Global Industry Demand (% share) HDPE, 45% LDPE, 27% 5.0 LDPE More Profitable, Particularly In Trough Years Average Margin Advantage of LDPE vs. other PE Grades Total Capacity: 173 billion pounds Source: CMAI LLDPE, 28% Westlake Capacity (% share) LLDPE, 33% HDPE, 5% LDPE, 62% cents/ lbs LDPE vs. LLDPE LDPE vs. HDPE Before LDPE vs. LLDPE LDPE vs. HDPE Trough Years Total Capacity: 2.5 billion lbs 7

8 WESTLAKE S FAVORABLE POLYETHYLENE PRODUCT MIX vs. PEERS Westlake s PE Business Is Favorably Weighted to LDPE vs. North American Peers Westlake Koch Industries LyondellBasell Among the highest LDPE product mix percentage in U.S. and Canada Dow ExxonMobil ChevronPhillips NOVA 0% 20% 40% 60% 80% 100% Source: Chemical Data, Inc. 8

9 INDUSTRY GLOBAL POLYETHYLENE ADDITIONS FOCUSED ON LLPDE AND HDPE, NOT ON LDPE 4.5% 4.0% LDPE LLDPE HDPE Incremental Change/Total Capacity (%) 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: CMAI However, Westlake is focused on LDPE, a product for which: - Capacity in the U.S. is not being expanded - North American supply and demand is balanced - New additions intended to primarily serve Asian & European markets 9

10 BENEFITS OF AUTOCLAVE LDPE vs. TUBULAR LDPE Autoclave LDPE (WLK Focus) Market Focus: More Specialty Suitability for Niches: High Tubular LDPE More Commodity Much Less Product Mix Broad (desirable) Narrow Product to Product Transition: Efficient Costly Competitive Dynamics: Global Capacity Additions None Market Focus for New Additions: Not Applicable Moderate Asian & European Markets Autoclave Advantage: With no new autoclave capacity coming online and an aging reactor base, supply/ demand balance for autoclave will grow tighter. Westlake s autoclave reactors are larger and newest in North America, providing strong margins for many years. 10

11 WESTLAKE FOCUSES MORE ON DESIRABLE AUTOCLAVE LDPE REACTORS World LDPE Mix Westlake LDPE Mix 54% 46% 20% 80% Tubular Autoclave Tubular Autoclave, Specialty & Epolene Source: CMAI Westlake Key Product Lines Autoclave LDPE and our Specialty Polymers Key Markets Food Packaging, Extrusion Coating, Protective Packaging, Shrink Wrap 11

12 INDUSTRY SUPPLY/DEMAND mm lbs 3,800 Total PE Sales & Capacity 3,600 3,400 3,200 3,000 2,800 2,600 2,400 2,200 2,000 Jan-05 Mar-05 May-05 Jul-05 Sep-05 Nov-05 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Industry Industry Capacity Ind. trend Source: American Chemistry Council Plastic Industry Producers' Statistics Group 12 Capacity per CMAI.

13 DRIVERS OF PE DEMAND Retail Sales 4Q08 vs. 4Q07 Percent of Retail Sales Change Motor Vehicle Dealers 17.0% -23.6% Gasoline Stations 9.0% -20.7% Furniture Stores 2.5% -12.6% Building Materials 7.3% -7.2% Apparel Stores 5.0% -6.7% Electronics Stores 2.5% -5.4% Internet 7.2% -3.2% Sporting Goods 2.0% -2.8% Miscellaneous 2.8% -1.8% General Merchandise 14.0% 1.1% Eating and Drinking Places 11.0% 1.8% Food Stores 14.0% 2.8% Health Stores 6.0% 4.4% Not key drivers of polyethylene demand Key drivers of polyethylene demand Sources: Nova Chemicals, McVean Trading and Investments, LLC 13

14 HISTORICAL DEMAND U.S. PLUS CANADA Total PE Domestic Demand and % Growth Mill Lbs % YOY 35, , , ,000 15, , , , , , , , , Source: CMAI PE Domestic Demand % YOY Growth 14

15 MONTHLY SALES AND INVENTORY - LDPE mm lbs 1,400 Industry Monthly LDPE Sales and Inventory Days , , Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 LDPE Inv. LDPE Ind. Sales LDPE Dom Sales LDPE Exp Sales DSI Source: American Chemistry Council Plastic Industry Producers' Statistics Group 15

16 MONTHLY SALES AND INVENTORY - LLDPE mm lbs 2,000 1,800 1,600 1,400 1,200 1, Industry Monthly LLDPE Sales and Inventory Days Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 LLDPE Inv. LLDPE Ind. Sales LLDPE Dom Sales LLDPE Exp Sales DSI Source: American Chemistry Council Plastic Industry Producers' Statistics Group 16

17 HIGH LEVEL OF INTEGRATION IN VINYLS SEGMENT Purchased Chlorine 520 MMlbs Chlor-Alkali Caustic Soda 605 MMlbs Vinyls Segment Merchant Sales Caustic Soda Chlorine 550 MMlbs Ethylene Dichloride (EDC) Vinyl Chloride Monomer (VCM) 1.85 Blbs Polyvinyl Chloride (PVC) 2.00 Blbs PVC Fabricated Products 1.10 Blbs Fabricated Products PVC Ethylene 450 MMlbs VCM Note: Capacities include China JV 17

18 HIGHER OPERATING RATES VS PEERS, PARTICULARLY IN TROUGH YEARS PVC Operating Rates Westlake Advantage over Industry Peers 100 Industry Westlake Operating Rate Advantage vs. Peers %, of operating rate year, avg. ( ) 6.1% Trough Years, avg. 9.0% 70 ( ) Higher WLK operating rates, particularly in trough years Operating culture, execution, integration Source: CMAI and Westlake 18

19 NORTH AMERICAN PVC SUPPLIES Top 5 US producers supply > 90% of PVC resin as of today: Westlake 9% Other 4% Shintech 31% Formosa 17% Georgia Gulf 16% Oxy Vinyls 23% Source: CMAI 2008 World Vinyls Analysis 19

20 THOUGHTS ON PVC Many expect late 2008 demand levels to continue Expect a few bright spots Rising global demand for clean water Infrastructure projects play to Westlake s strategy of large diameter PVC pipe PVC demand levels continue to support caustic pricing Both producers and converters continue to manage inventories due to risks in pricing swings 20

21 VINYLS INVESTMENT DELIVERS INTEGRATION BETTER THAN PEERS Ethylene Chlorine VCM PVC Fab. Products Westlake Chlorine and PVC expansions complete Vinyls chemical integration PVC Pipe #1 or #2 in areas served 985 MMlbs of annual capacity Westlake focuses on large diameter pipe which has better margins Westlake capacity is 80% nonresidential PVC pipe is protected from imports due to transportation barriers Fence, Deck and Railing # 2 producer in North America 65 MMlbs of annual capacity Doors and Window Profiles 47 MMlbs of annual capacity Note: Capacities include China JV 21

22 STRONG MARKET SHARE IN PIPE North American Pipe Corporation Locations Vinyl Pipe Plant Locations Vinyls Chemical Sites: Calvert City, KY; Geismar, LA 22

23 AN AGEING & DETERIORATING U.S. INFRASTRUCTURE INCREASES PIPE DEMAND 2009 Grade Trend 2009 Grade Trend Roads D- Wastewater D- Bridges C Dams D Transit D Solid Waste C+ Aviation D Hazardous Waste D Schools D Navigable Waterways D- Drinking Water D- Energy D+ Source: 2009 Report Card for America's Infrastructure, American Society of Civil Engineers 23

24 VINYLS CHINESE FOOTPRINT, UNLIKE MOST PEERS Suzhou Huasu Plastics Company markets PVC resin and film products to both domestic and export markets, while exporting the Window profiles to North American markets Established 1992, J.V. with Westlake and Ineos. Westlake has a 59% share in the Joint Venture Located in Suzhou, Jiangsu Province, China - Operations include: 300 million lbs PVC resin plant 145 million lbs calendering facility 33 million lbs window profiles 24

25 THOUGHTS ON FABRICATED PRODUCTS PVC window producers will undergo consolidation PVC window consolidation positions our China JV to be able to capture a growing share of the market as it consolidates Small diameter PVC pipe producers will continue to rationalize production to meet demand Larger diameter PVC pipe producers, while challenged, will see the bulk of any up-tick in demand and will disproportionally benefit from new infrastructure projects 25

26 WESTLAKE STRENGTHS Consistently Demonstrated Profitable Growth Strategically located asset base Vertical integration with high operating rate Feedstock Flexibility LDPE driven product mix in Olefins Earnings leverage based on product diversification Financial flexibility 26

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28 APPENDIX Reconciliation of EBITDA to Net Income (Loss) and to Cash Flow from Operating Activities (in $ Thousands) Adjusted EBITDA 326, , , ,893 87,861 Debt Retirement Cost (15,791) (646) (25,853) - - EBITDA 311, , , ,893 87,861 Less: Income Tax (provision) benefit (69,940) (118,511) (87,990) (44,228) 28,479 Interest expense (39,350) (23,717) (16,519) (18,422) (33,957) Depreciation & Amortization (81,075) (81,241) (86,262) (103,514) (111,926) Net Income (Loss) 120, , , ,729 (29,543) Changes in operating assets and liabilities (35,129) 45,885 28,773 (57,849) 92,892 Deferred income taxes 65,188 45,745 13,852 5,286 (13,897) Cash flow from operating activities 150, , ,184 62, ,089 28