HOUSTON--(BUSINESS WIRE)--Westlake Chemical Corporation (NYSE: WLK) today reported net income attributable to Westlake for the three months ended June 30, 2020 of $15 million, or $0.11 per diluted share, on net sales of $1,709 million. Net income in the second quarter of 2020 decreased by $104 million compared to second quarter 2019 net income of $119 million, or $0.92 per share, on net sales of $2,144 million. Income from operations of $36 million for the second quarter of 2020 decreased by $158 million from income from operations of $194 million for the second quarter of 2019. The decreases in net income and operating income were primarily due to the global economic impact from COVID-19 and the significant drop in oil prices, which reduced North American ethylene industry feedstock competitiveness. Reduced demand as a result of the pandemic and lower oil prices led to lower global sales prices for our major products and lower sales volumes for caustic soda and downstream vinyls products. 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. Net income was further impacted by higher interest expense due to higher average borrowings during the period while benefitting from a lower effective tax rate.
Second quarter 2020 net income of $15 million, or $0.11 per diluted share, decreased by $130 million from first quarter 2020 net income of $145 million, or $1.13 per share. Income from operations of $36 million for the second quarter of 2020 decreased by $100 million from income from operations of $136 million for the first quarter of 2020. The decreases in net income and income from operations versus the prior quarter were primarily due to lower production and sales volumes for caustic soda and PVC resin and lower sales prices and margins for polyethylene and PVC resin, in each case resulting from the impacts of COVID-19 and reduced global demand. The impacts to operating income were partially offset by higher sales prices for caustic soda and lower fuel and operating costs. Net income was further impacted by higher interest expense while benefitting from a lower effective tax rate when compared to the previous quarter. The first quarter of 2020 benefited from a $62 million net loss carryback as permitted under the Coronavirus Aid, Relief and Economic Security ("CARES") Act enacted in March 2020.
For the first six months of 2020, net income of $160 million, or $1.24 per share, decreased by $31 million from the first six months of 2019 net income of $191 million, or $1.47 per share. Income from operations of $172 million for the first six months of 2020 decreased by $156 million from income from operations of $328 million for the first six months of 2019. The decreases in net income and income from operations were primarily due to lower global sales prices for our major products and lower sales volumes for caustic soda stemming from the impacts of COVID-19 and lower oil prices. The first six months of 2020 benefited from lower feedstock and fuel costs, reduced operating and selling, general and administrative expenses, as well as lower costs associated with planned turnarounds, restructuring, transaction and integration-related activity as compared to the prior-year period. Net income further benefited from a lower effective tax rate and a carryback of federal net operating losses of $68 million, or $0.53 per diluted share, resulting from the CARES Act.
"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," said Albert Chao, President and Chief Executive Officer. "Westlake's foundational principle is a commitment to safety. Our first priority has been to ensure the health and safety of our employees around the world while delivering essential products that serve a number of critical industries including food services, packaging and healthcare. Although this pandemic is creating near-term turbulence, our long-term fundamentals remain strong. 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. The prudent management of our business through this pandemic, combined with the strong fundamentals of our business, will allow us to deliver long-term value to our shareholders."
Net cash provided by operating activities was $448 million for the second quarter of 2020 and $509 million for the first six months of 2020. As of June 30, 2020, cash and cash equivalents were $1,109 million and long-term debt was $3,745 million. Capital expenditures were $127 million and $291 million for the second quarter and first six months of 2020, respectively.
EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $236 million for the second quarter of 2020 decreased by $136 million compared to second quarter 2019 EBITDA of $372 million. Second quarter 2020 EBITDA decreased by $101 million compared to first quarter 2020 EBITDA of $337 million. For the first six months of 2020, EBITDA of $573 million was $113 million lower than EBITDA for the first six months of 2019 of $686 million. A reconciliation of EBITDA to net income, income from operations, and net cash provided by operating activities can be found in the financial schedules at the end of this press release.
On June 12, 2020, Westlake issued $300 million of its senior unsecured notes due 2030 (the "Notes") under its existing shelf registration statement. The Notes will bear interest at a rate of 3.375% per annum and are scheduled to mature on June 15, 2030. Westlake intends to use a portion of the net proceeds of the Notes to fund the purchase in lieu of redemption of three series of tax-exempt revenue bonds issued by the Louisiana Local Government Environmental Facilities and Community Development Authority on behalf of Westlake with an aggregate principal amount of $254 million. The initial tranche of $100 million was redeemed on August 1, 2020 and the balance is intended to be redeemed in November of this year. Westlake intends to use the remaining net proceeds for general corporate purposes.
OLEFINS SEGMENT
Second quarter 2020 income from operations for the Olefins segment of $25 million decreased by $57 million from second quarter 2019 income from operations of $82 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.
Olefins income from operations of $25 million in the second quarter of 2020 decreased by $37 million from first quarter 2020 income from operations of $62 million. This decrease in income from operations versus the prior quarter was primarily due to lower sales prices for polyethylene and higher feedstock costs, partially offset by increased polyethylene sales volumes and lower fuel costs.
For the first six months of 2020, Olefins income from operations of $87 million decreased by $32 million from income from operations of $119 million for the first six months of 2019. This decrease in income from operations was primarily due to lower sales prices for our major products, partially offset by higher polyethylene sales volumes and lower feedstock and fuel costs.
VINYLS SEGMENT
Second quarter 2020 income from operations for the Vinyls segment of $20 million decreased by $109 million from second quarter 2019 income from operations of $129 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. The decrease was partially offset by lower ethane feedstock and fuel costs, reduced operating costs and lower costs associated with planned turnarounds.
Vinyls income from operations for the second quarter of 2020 of $20 million decreased by $53 million from first quarter 2020 income from operations of $73 million, primarily due to lower sales volumes for caustic soda, lower global sales prices for PVC resin, and higher ethane feedstock costs, partially offset by lower operating and fuel costs.
For the first six months of 2020, Vinyls income from operations of $93 million decreased by $137 million from income from operations of $230 million for the first six months of 2019. This decrease in income from operations was primarily due to lower sales prices for our major products and lower sales volumes of caustic soda. The impact to operating income was partially offset by lower ethane feedstock and fuel costs, reduced operating costs and lower costs associated with planned turnarounds, as well as the contribution from our ethylene joint venture with Lotte Chemical.
About Westlake
Westlake is a global manufacturer and supplier of materials and innovative products that enhance life every day. Headquartered in Houston, we provide the building blocks for vital solutions — from packaging and healthcare products to automotive and consumer goods, to building and construction products. For more information, visit the company's web site at www.westlake.com.
