Westlake Chemical Corp posted weaker-than-expected profit on Thursday as the slump in the housing market hurt its vinyl products segment, sending its shares down 7 percent. Excluding items the company posted third-quarter earnings of 66 cents a share, well below Wall Street's estimate of 80 cents a share, according to Reuters Estimates.
Shares of the company fell $1.72 to $22.82 in morning trade on the New York Stock Exchange. In a note to clients, HSBC analyst Hassan Ahmed noted that the 74 percent sequential decline in vinyls segment margins was more worrying than the 89 percent year-over-year decline in the unit's margins.
"With the fourth quarter seasonally being the weakest as far as PVC markets go and no end to the US housing slump in sight, we would be very cautious on forecasting any demand pick-up in the near term," said Ahmed.
Net income declined to $38.3 million, or 59 cents a share, from $61.7 million, or 95 cents a share, a year earlier. However, quarterly revenue rose 25 percent to $840.2 million, helped by strong revenue from its olefins segment.
Earlier this month, the Houston-based company said it was investing about $90 million to expand its vinyls business, which makes polyvinyl chloride, or PVC, pipes and windows used in housing and construction.
"Given the continued weakness in the vinyls segment, we find WLK's recent announcement to expand capacity at its chlor-alkali and PVC units perplexing," said Ahmed.
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