Westlake Chemical Corp. Q3 2008 Earnings Call Transcript

Nov. 6.08 | About: Westlake Chemical (WLK)

Westlake Chemical Corp. (WLK) Q3 2008 Earnings Call November 6, 2008 11:00 PM ET

Executives

Dave Hansen - SVP, Administration

Albert Chao - President and CEO

Steve Bender - SVP, CFO and Treasurer

Analysts

Kevin McCarthy - Banc of America Securities

Nils Wallin - Credit Suisse

Mike Judd - Greenwich Consultants

Gregg Goodnight - UBS

Jim Friedland - Deutsche Bank

David Silver - JPMorgan

Operator

Good day, ladies and gentlemen, thank you for standing by. Welcome to the Westlake Chemical Corporation 3rd quarter 2008 earnings conference call. During the presentation, all participants will be in a listen only mode. After the speakers’ remarks, you will be invited to participate in a question and answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, November 6, 2008. I would now like to turn the call over to today’s host, Mr. Dave Hansen, Westlake’s Senior Vice President of Administration. Sir, you may begin.

Dave Hansen

Thank you and good morning everyone. Thank you for joining for the Westlake Chemical Corporation 3rd quarter conference call. I am joined today by Albert Chao, our President and CEO and Steve Bender, our Senior Vice President and Chief Financial Officer, and other members of our management team. The agenda for today will be as follows: Albert will first make a few comments regarding Westlake’s performance during the third quarter; Steve will then provide you with a more detailed look at our financial and operating results. Albert will conclude with a discussion of recent developments and then will open up the call for questions.

Today, management is going to discuss certain topics that will contain forward looking information that is based on management’s beliefs, as well as assumptions made by and information currently available to management. These forward looking statements suggest predictions or expectations and thus are subject to risk or uncertainties. Actual results could differ materially based upon factors including the cyclical nature of the chemical industry, availability, cost and volatility of raw materials, energy and utilities, governmental regulatory reactions and political unrest, global economic conditions, industry operating rates, the supply-demand balance for Westlake’s products, competitive product and pricing pressures, access to capital markets, pathological developments, and other risk factors.

Westlake issued earlier this morning, a press release with details of our quarterly financial and operating results. This document is available in the press release section of our webpage at www.westlake.com. A replay of today’s call will be available beginning one hour after completion of the call, until 1pm Eastern time on November 13, 2008. The replay may be accessed by dialing the following numbers: domestic callers should dial 1-888-286-8010, international callers may access the replay at 617-801-6888. The access code for both numbers is 73527705. Please not that information recorded on this call speaks only as of today, November 6, 2008, and therefore you are advised that time sensitive information may no longer be accurate as of the time of any replay. I will finally advise you that this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at www.westlake.com. Now, I’d like to turn the call over to Albert Chao, Albert?

Albert Chao

Thank you, Dave. Good morning ladies and gentlemen, and thank you for joining us. The first quarter was characterized by three major events – the two major hurricanes that hit the Gulf Coast, the global economic deceleration and extreme volatility in energy and feed stock costs. Westlake performed well in spite of these events, as Steve will discuss the details of Westlake’s performance and our strong liquidity position later in the discussion. Now, let us talk about the results.

In this morning’s press release, we reported third quarter earnings of $0.42 per diluted share, which was down from the $.59 per diluted share reported in the third quarter of last year, and at $0.72 per diluted share reported in the second quarter of 2008.

These results include a negative impact of approximately $0.20 per diluted share, related to the two hurricanes. Sales for the quarter were $1.1 billion, driven by higher prices in both our Olefins and Vinyls segments. Margins declined in our olefins segment but margins improved significantly in our Vinyls segment as compared to last year and over the preceding quarter.

During August and September, we shut down our Vinyls facility at our Geismar complex once and our Olefins facilities at our Lake Charles complex twice, due to hurricanes Gustav and Ike. Our damage to the facilities was minimal; the lack of electrical power, feed stocks and other utilities extended the outages.

The Lake Charles facilities were shut down for about three weeks due to the hurricanes, while the Geismar facilities were shut down for about one and a half weeks, due to hurricane Gustav.

While approximately 70% of US ethylene capacity was shut down in September, our facilities were some of the first plants up after the two storms, due to the hard work of our staff and our various suppliers. These outages negatively impacted our first quarter earnings, due to unabsorbed fixed-cost and lower sales volumes.

We have estimated the reduction in operating income as a result of these outages was approximately $20 million or $0.20 per diluted share during the quarter. So, if you add the hurricane impact to our reported earnings of $0.42, I believe this was a good quarter for Westlake, particularly considering the numerous challenges we faced.

Our Olefins segment began the quarter with strong sales volumes, both domestically and in the export market, and incremented a $0.07 per pound price increase, offsetting feed stock cost which had reached unprecedented levels at that time.

Late in the quarter the economic malaise accelerated and energy and feed stock costs began to fall. Customers slowed their buying patterns in anticipation of lower prices, due to the steep decline in feed stock costs, which further weakened demand. As an example, ethylene price, after reaching almost $1.40 per gallon early in the quarter, fell to $0.80 per gallon by the end of the quarter, and continued falling rapidly into October.

The significant increases in polyethylene pricing in the third quarter followed the upward trend in feed stock costs earlier in the quarter. Similarly, the price declined later in the quarter as feed stock fell. On the Vinyls side, we implemented a $0.04 per pound price increase for PVC resin in July and we’re seeing some increases in PVC pipe as well.

In spite of this, PVC resin and pipe margins continue to be negatively impacted by outgoing weakness in the construction markets and instability in the credit and financial markets, which is now further compounded with the start up new capacity.

Caustic demand remained strong in the third quarter and prices continued to increase as lower demand for chlorine caused tightness in supplies for caustic. Now I would like to turn the call over to Steve for a review of our third quarter results.

Steve Bender

Thank you, Albert and good morning everyone. I am going to begin today with a brief discussion of our consolidated financial results, followed by a more detailed discussion of our segment results, beginning with our consolidated results.

We reported operating income of $49 million on sales of $1.1 billion in the third quarter of 2008, as compared to operating income of $74 million on sales of $1.1 billion in the second quarter of 2008. As Albert mentioned earlier, we have estimated that the negative impact of the outages caused by the two hurricanes was approximately $20 million, or $0.20 per diluted share.

Our reported net income in the third quarter 2008 was $27 million or $0.42 per dilute share, compared to net income of $47 million or $0.72 per diluted share in the second quarter of 2008. Net income in the second quarter benefited from the reversal of $3 million of tax reserves, due to tax settlements.

Now let’s talk about FIFO accounting. Third quarter results were negatively impacted by the utilization of first in, first out or FIFO method of inventory accounting as compared to utilizing the last in, first out or LIFO method, used by some companies in the industry. The unfavorable impact resulted in the sharp decreases in feed stock during the quarter. We estimate that the unfavorable FIFO impact in the third quarter was approximately $12 million after tax, or $0.18 per share.

In contrast, the second quarter was favorably impacted by the use of FIFO accounting by the significant increases in feed stock costs that have occurred in that quarter. The estimated positive impact in the second quarter was approximately $23 million after tax, or $.36 per share.

Now, let’s look at the year-to-date results. Operating income for the first nine months of 2008 was $136 million on sales of $3.1 billion, as compared to operating income of $155 million on sales of $2.3 billion in the first nine months of the prior year. Net income for the first nine months of the year was $80 million or $1.23 per diluted share, as compared to net income of $96 million or $1.47 per diluted share last year.

Selling, general, and administrative expenses decreased in the first nine months of 2008, as compared to the first nine months of 2007, primarily due to the transition costs related to the acquisition of the Longview facilities that we incurred in the first part of 2007 and a decrease in legal fees, partially due to a legal settlement in the third quarter of 2007. Interest expense increased year over year, due to the issuance of our $250 million tax-exempt bonds last December.

Now turning to our balance sheet, I will highlight a few key items. At the end of the third quarter our long term debt was $516 million, which reflects our $250 million tax-exempt bond issued in December 2007. The balance sheet also reflects a restricted cash balance of $147 million, representing monies in escrow from the unused proceeds of these bonds that will continue to provide the liquidity to fund our various capital projects in Louisiana over the next several years. Our net debt to total capitalization ration remains low at 20%. Capital spending for the first nine months totaled $143 million and includes the $16 million in capitalized turn around costs at styrene facility. We estimate our capital expenditures for the full-year 2008 will be in the $170 to $200 million range.

We have not yet finalized our 2009 capital plan, but we will provide guidance when we discuss our fourth quarter results. I’d like to take a moment to take a few words about our liquidity. Now as we all know these are challenging times. I want to assure you that Westlake is well-positioned financially.

In September, we amended our revolving credit facility, and increased the lender’s commitments under the long-term credit facility from $300 million dollars to $400 million dollars, and extended the maturity to $2,013. Currently, the revolver is for the most part undrawn.

In addition, we have the proceeds from the taxes and bonds of more than $147 million dollars which will be used to fund capital projects in Louisiana. We also add that the steep in raw materials costs will provide step declines in materials costs, and we can expect working capital to decline providing additional liquidity. Thus, the company has ample liquidity and financial flexibility.

Now let me turn to our Olefins segment. We reported operating income of $18 million dollars in sales of $125 million during the third quarter as compared to operating income of $58 million dollars on sales of $766 million dollars reported in the second quarter of 2008. Operating income declined in the third quarter, as compared to the second quarter, primarily due to the impact of the outages caused by hurricanes Gustav and Ike and lower polyethylene sales volumes.

The negative hurricane impact of $20 million dollars and the fiber (inaudible) effects were largely attributable to the Olefins segment. Sales volumes declined due to the two hurricanes and because customers slow their buying patterns in anticipation of lower prices tend to decline rapidly.

After the two storms and significant decline of feedstock cost, the poly ethylene prices increases that were implemented during the July-August time frame, were rolled back in September. Trading activity in the third quarter resulted in the loss of one million dollars as compared to a $7 million dollar trading loss in the second quarter.

On a year-to-year basis, our Olefins segment report operating income of $96 million dollars on sales of $2.2 billion dollars, as compared to operating income of $127 million dollars on sales of $1.6 billion dollars reported in the first nine months of 2007. Fourteen outages were the largest single factor that led to the decrease in operating income.

In addition, during the first nine months of 2008 we incurred trading losses of $8 million dollars as compared to trading gains of $6 million last year. While the first nine months of 2008 included the impact of the styrene turn around and revamp project, and the first nine months of 2007 included the impact of the turnaround at one of our ethylene units in Lake Charles, the overall polyethylene and styrene margins increased year over year as some prices outpaced higher feedstock costs.

Now let me turn to the vinyl segment. Our vinyl segment reported operating income of $30 million on sales of $349 million during the third quarter as compared to an operating income of $18 million dollars on sales of $340 million reported in the second quarter of 2008.

PVC prices moved up during the third quarter, as we were able to implement a $0.04 per pound increase in July. PVC pipe prices moved up in conjunction with PVC resin during the quarter. Calvert City’s products increased in the third quarter as compared to the second quarter as prices increased while average feedstock costs for propane and ethylene for the period remained relatively flat. However, PVC resin and pipe sales volumes were lower in the third quarter as compared to the second quarter.

Customers slow their buying patterns, anticipating lower prices as feedstock costs begin to fall rapidly at the later part of the quarter, and the vinyl segment continued to be negatively impacted by the weakness in the construction markets. Recent capacity additions and the recent dysfunction in the credit markets have further compounded these problems. Despite all of this, caustic prices have continued to rise during the quarter.

The weakness in PVC’s demand has led to reduced coring production which in turn, has caused tightness in supplies for caustic. Cost in contract prices as reported by CMAI increased in either three months in the third quarter, and reached more than $900 dollars per ton by the end of the quarter.

On a year-to-date basis, our vinyl segment reported an operating income of $46 million on sales as compared to our operating price of $33 million dollars on sales of $772 million reported in the first nine months of 2007. This increase year over year is primarily related to the significant increases in caustic prices.

In addition, PVC resin prices haves outpaced higher raw materials cost, and our PVC resident sales volumes are higher. These increases are partially offset by lower PVC pipe prices and sales volumes.

Now I’ll turn the call back over to Albert. Albert?

Albert Chao - President and CEO

Thanks Steve. First, let me provide an update on the status of a number of our strategic initiatives and then I’ll discuss the outlook for the industry. As discussed in our last call, work continues on several projects in our final segment, which includes extensions of our Calco law unit, and our PVC resident plan in Calvert City, Kentucky. And our PVC pipe facility in Yucca, Arizona, to serve the western region of the US, a region which we have not actively participated. These projects will add to our Vinyls integration strategy.

Our new large diameter pipe facility, located in close proximity to our PVC resident Calvert City, started up during the third quarter. The plan has capacity, approximately 15 million pounds per year.

In August, we announced that we will construct a new Chlor Alkalai plant to be located at our vinyl complex in Geismar, Louisiana. The new Chlor Alkali unit will have annual capacity of approximately 250,000 ECU tons. It will bring our total capacity to 125,000 tons a year.

This new plan will allow us to achieve full chlorine integration. The project is currently estimated at a cost of approximately $250 to $300 million dollars. It is targeted for completion in the first half of 2011. It will be partially funded by the tax-exempt bonds issued in 2007.

Now, I want to talk about the status of our turnarounds. As mentioned in the last call, we now plan to perform a maintenance turnaround at one of our ethylene units in Lake Charles, in the first half of 2009, which coincide with a number of energy-saving capital projects associated with the unit. We will continue to keep you updated ion the timing of the turnaround.

Not only, let’s talk about the outlook for the industry. On the Vinyls front, the financial market’s breakdown, characterized by instability in the credit markets, is now affecting nearly every segment of our economy. The seriously troubled residential housing sector, along with a slowdown in other construction housing markets, and the recent startup of new PVC capacity will continue to negatively impact our Vinyls business for some time.

Compounding this further, the seasonal slow is just ahead of us. Our caustic sales have proven to be a valuable hedge against a weak Vinyls market, as reduced chlorine production has tightened the caustic market. By fully integrating our clark-like capacity, we expect to significantly strengthen opposition in the Vinyls marketplace.

Now let’s turn to polyethylene, sales volumes are totally at low levels as you might expect, with a severe drop in energy and feedstock costs, and economic uncertainty. Customers have destocked inventories and are buying only what they need while export markets have slowed considerably.

Because of the rapid decline in feedstock costs, current polyethylene margins remain at high levels and customers expect prices to decline further before they resume rebuilding their inventories. A positive outcome from all of this is that we fully expect our working capital requirements to be reduced significantly.

Over the last couple of years, our feedstock costs have climbed. The working capital we have had to maintain reached very high levels. The reduction in working capital will give us additional liquidity in the coming months.

We believe that because almost all of our polyethylene, namely low-density and linear-low density, goes into consumer, non-durable products, such as food packaging and trash bags, the demand for our products should be less impacted by the economic slowdown.

This being said, an extended US or even broader global recession could have a negative impact on industry. Over the long-run, however, lower polyethylene prices would stimulate increases in consumption and demand globally. In response to these market conditions, I want to assure you that we are taking steps that will further preserve our financial flexibility.

We have a track record of strong financial discipline and we are cutting costs and reviewing our capital project throughout the company as we’ve faced these economic challenges.

At the same time, we are well-positioned to look at opportunities to expand our business. Thank you very much, now let me turn it back over to David Hansen.

Dave Hansen

Thank you Albert. Before we begin taking questions, let me say that this teleconference will be available starting an hour after we conclude with the call. We will provide that number again at the end of the call.

Operator, we’re now prepared to take questions.

Question-and-Answer Session

Operator

Thank you, Dave. (Operator instructions) And your first question on the line will come from Mark Connolly from - Credit Suisse. You may proceed Mark.

Mark Connolly- Credit Suisse

Good morning, this is Nils Wallin sitting in for Mark. How are you?

Steve Bender

Good morning.

Nils Wallin- Credit Suisse

A question about caustic sorter pricing, obviously that’s a big driver right now in the Vinyls market chain and the published prices are very high although some of your competitors put out an ECU net back which is lower than what you typically see by the consultants. Are we just in a lag period or are the price increases that have been nominated are not going through as much because of contracts and caps and things like that?

Albert Chao

We are seeing strong demands from caustic because of a sharp reduction in demands for poring, which goes into PVCs. As a result, we are seeing price increases and at Westlake we don’t have some of those price caps – we are not affected by those price caps.

Nils Wallin- Credit Suisse

Further then to that, the increases that are there I would assume is, do you have any what the limit might be for those increases because certainly the end market that could typically caustic, for example pulp and paper, aluminum, fibers and things like that are not doing well, there’s a lot of production cuts there, what’s your sense of how much higher these price increases could go before there is some sort of demand destruction?

Albert Chao

I don’t know the answer. However, we are seeing some imported costs of overseas. But Overseas-wise, the plumbing demand has dropped. Overseas coffee prices are very tight as well.

Nils Wallin- Credit Suisse

Thanks. Finally, you have presence out in Asia with Tightlin and PVC units in China. Would you give us a sense of what the trade is like out there with tighter credit, also obviously with the tighter letters of credit shutdown, is it at a much lower level or are people waiting for credit conditions to return?

Albert Chao

I think what we are seeing in the US is happening globally – first of all, there is the sharp drop in costs, from crude oil, from NASA, ethane and propane. That would cause prices to come down and the buyers will want to wait until the price stabilizes. The second part is with the financial crisis which led to economic recession globally, which caused a demand in drop that affected different parts differently in different regions. So there’s a fair amount of inventory destocking going around, and people are only buying when they have to.

We believe especially on some of the extra chemical products like polyethylene, those really go with consumer staples. There is certain demand in both areas, so after the price stabilizes and after inventory are being destocked there should be some reasonable demand for the product.

Nils Wallin- Credit Suisse

Thank you very much.

Albert Chao

You’re welcome.

Operator

Your next question comes from the line of Michael Judd of Greenwich Consultants, please go ahead.

Mike Judd – Greenwich Consultants

yes thanks for taking my question, it's obvious the situation has been difficult right now in terms of customer orders and inventory levels and things like that, can you give us a sense of, I don't know if you guys do a budget or you get together to do some planning for next year, but what is your expectations, maybe beyond the fourth quarter into the first and second quarters of next year.

Steve Bender

Yes Mike, certainly that we believe that our customers are helping keep as low inventory as they can run and certainly producers, also keeping low inventory.

Albert Chao

And we are hearing of various plan reductions or even a shut down in our industry. By looking at the projections operating rates certainly, in the vital segment, we're heading into a season, which is traditionally a lower season, as you look at a full sample CDI reports and their view of quarterly operating rates, we are seeing that forbidden products some of first quarter, operating rates somewhat higher than third quarter as you know, a large part of quarter in the petrol-chemical industry in the Gulf Coast were affected by the two hurricanes, so the fourth quarter operating rates is higher than third quarter. In the first quarter '09 some part of the higher than the fourth from, but to compare the full year of '09 vs. '08 to the absence of '09 for many of the products are higher operating rates than '08. I think there would be some inventory adjustment quarter to quarter but buying huge deep recession globally that industry are operating at low, but reasonable clip, moving forward.

Mike Judd – Greenwich Consultants

Do you have an estimate yet of what your capital expenditures will be next year?

Albert Chao

No Mike, we're just in the normal cycle of our budgeting process for 2009, and once we finalize that capital spending program, I will be announcing that number.

Mike Judd – Greenwich Consultants

Looking at the balance sheet, I'm not sure I saw a lot granularity on tension, is there any kind of update that you can give us on pension in terms of funding levels and what to think about that, in terms maybe potentially additional needs for cash flow in that direction.

Steve Bender

Mike we look at that on a regular basis and we're adequately funded at this time, but we watch it on a regular basis.

Mike Judd – Greenwich Consultants

Thanks for your help

Albert Chao

You're welcome.

Operator

Thank you gentleman, and the next question comes from Evelyn Rodriguez from Goldman Sachs, you may proceed.

Evelyn Rodriguez – Goldman Sachs

Thank you and good morning guys, I have a quick question for you. You may have noticed on the press release you have stated that you are looking for opportunities of expand your business. Is there anything outside of the clockwise projects you've announced that you would want to expand into?

Albert Chao

We will be releasing vertical integration at oppositions or vital markets on a global basis. So we can't certainly pursue review opportunities and when there is a funding to report, we'll definitely report to you.

Evelyn Rodriguez – Goldman Sachs

Can you guide us what businesses you would be interested in or anything that I would get too excited.

Albert Chao

We will see depending on how things go.

Evelyn Rodriguez – Goldman Sachs

Ok that makes sense. In terms of inventory levels and so forth when your guys report to you, what's the sense of how low the inventory levels are on the consumer side and how quickly those guys have to come back to the market if business activity or if prices stop going down?

Albert Chao

That's a good question. I think that inventory situation has to be worked out throughout the systems, it will produce a level only, it's not a converter level only, it's not in the warehouses but all the way to the retailers, when that system goes through, which will take a couple of months and then depending on the economy, on the demand levels, we will see how much we need to maintain, but I presume it's on prices, which dries most of the energy which chemical or supply demand on the world will start moving up then people will think that they had to going up.

Evelyn Rodriguez – Goldman Sachs

OK, thank you very much.

Robert Chao

You’re welcome.

Operator

Thank you, gentlemen, and your next question will come from the line of David Silver from JP Morgan. You may proceed, sir.

David Silver – JPMorgan

Yeah, hi, good morning.

Steve Bender

Good morning, David.

David Silver – JPMorgan

A couple of questions, I guess maybe I’ll ask this to Steve, and this would be maybe to ask you to comment a little bit. You mentioned the negative effects of the hurricanes on your Geismar, and certainly Lake Charles facilities. I’m wondering if you noticed, noted, of if you could identify a hurricane benefit that you enjoyed this quarter related to your Calvert City facilities. I mean, I think it’s one of the few integrated PVC caustic units that was unaffected by the significant weather issues in the quarter. So was there either a volume pick up there or some attractively-priced spot business that you were able to exploit as a result of the favorable geography from Calvert City relative to the vast majority of your competitors?

Steve Bender

It’s hard to quantify that, but you know being inland as it was and not being affected by storm surge or power outages or other issues, certainly we’re continually able to service our customers. But it’s hard to give any quantification to that. And certainly that’s one of the benefits of being that far removed from weather issues like that, but it’s difficult to put a number on that.

David Silver – JPMorgan

OK, I’m going to ask you another question, Steve, that’s going to be difficult to put a number on. You mentioned a negative FIFO effect in the third quarter in the $12 million range. We’ll have to see how the fourth quarter goes, but if quarter-to-date trends persist, I think we’re looking at another large negative FIFO effect. Should we be thinking that in the fourth quarter that that effect could be greater than the $12 million that you estimated for the third quarter?

Steve Bender

Well, I wish I had my crystal ball and could gauge where we see prices end the quarter, but I think it is correct to say that with the trend there will be some tendency to see another negative impact, but it’s hard to give a specific number, because as I say we don’t know where prices will be. But given where we started the quarter, we’ll certainly see that direction will move.

David Silver – JPMorgan

OK, and then, Steve, one other question. I’m hoping you can help me. So you have an existing core alkali production in Calvert City. I think I have it at 205,000 ECUs, and then you have announced a 250,000 ECU grass roots facility in Geismar. I believe you also had a de-bottlenecking underway at Calvert City. Could you just remind me the size of that and the timing? Has that been completed and are you running it at the higher rate there?

Steve Bender

We do expect that to be completed in the first half of 2009, and so we’re not quite there yet but we do expect that to be completed in the first half of ‘09.

David Silver – JPMorgan

And can you remind me the size of that? Was it 80,000 ECUs?

Albert Chao

Combined with our existing chloride plant, its expansion will take us to about 275,000 ECU tons.

David Silver – JPMorgan

Up to 275. OK, thank you for that. Alright, that’s it, I’ll get back in the queue. Appreciate it.

Operator

Thank you, gentlemen. And once again, ladies and gentlemen, it is *1 if you have a question. Your next question will come from the line of Kevin McCarthy from Banc America Securities. You may proceed, sir.

Kevin McCarthy - Banc of America Securities

Yes, good morning. In the final segment, your profit nearly more than doubled your year over year, despite the FIFO headwind and despite the hurricane effect. When you look at that improvement in profitability, how much would you attribute to better caustic soda margins, or ECU margins, versus other factors?

Steve Bender

Kevin, that was probably the single largest driver here, we say very significant movement in pricing there, and as you know on the integrated chain that is the performing element in that chain.

Kevin McCarthy - Banc of America Securities

OK. And then shifting gears, Steve, to uses of free cash flow, I was wondering if you could update us on your priorities there, and in particular, you’ve been raising the dividend in fairly modest increments as you’ve become a public company. I was wondering if you could comment on your dividend policy and future opportunities for increases there.

Steve Bender

When we look at cash we certainly look at the range of uses. We look at capital spending, acquisition opportunities, and ways in which we can increase shareholder values, whether if it’s through dividend or buy back. And so the board certainly looks at dividends on a regular basis. But as I say that’s the order in which we look at the use of our free cash flow.

Kevin McCarthy - Banc of America Securities

And finally, with the new project that you’ve announced on the core alkali side at Geismar, how should we think about the project that you previously announced on the polyethylene side in Trinidad. Is it fair to say that will be a lower priority at this point? Or lower probability proceeding there?

Albert Chao

Yes, we are still discussing with the government of Trinidad and Tobago, and when there is news in that front we’ll definitely report back. Right now there’s no change on the status we have reported, nothing.

Kevin McCarthy - Banc of America Securities

OK, thank you very much.

Albert Chao

You’re welcome, sir.

Operator

Thank you. At this time the Q and A session has now ended. Are there any closing remarks, Dave?

Dave Hansen

Well we’d just like to thank everyone for your participation in today’s call. We hope that you will be able to join us for our next conference call to discuss our fourth quarter 2008 results. We wish you a good day. Thank you very much.

Operator

Thank you for your participation in today’s Westlake Chemical Corporation third quarter earnings conference call. As a reminder this call will be available for replay beginning an hour after the call has ended, and may be accessed until 1:00 p.m. Eastern Time on Thursday, November 13th. The replay can be accessed by calling the following numbers: domestic callers should dial 1-888-286-8010. International callers may access the replay at 617-801-6888. The access code at both numbers is 73527705. And once again, ladies and gentlemen thank you for your participation.

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