Axiall negatively impacted by pricing in Q4, plans outages in Q1 and considers MLP formation

By Lisa Kerner

Charlotte, N.C., Feb. 19 – Axiall Corp.’s fourth-quarter results were “negatively impacted by several items,” said president and chief executive officer Paul Carrico during the company’s earnings conference call on Thursday.

The items included ECU values falling “considerably on a year-over-year basis, with a particularly steep decline on the caustic component of ECU.” Declining oil prices also led to declining raw material costs in Aromatics, resulting in a large loss for the segment, said Carrico.

Aromatics had fourth-quarter net sales of about $166 million, a year-over-year decrease of about $28 million.

Natural gas prices were also higher in the fourth quarter.

“We'll continue our recent efforts to implement price increases for both chlorine and caustic, to recover higher cost and improve the profitability of this business,” Carrico said. We believe that ECU values will be driven by the combination of the strength of domestic demand and improvement in export volumes for both products.”

Chief financial officer Greg Thompson said the “margin picture for PVC and ECUs will not likely clear up before the second quarter when spring demand is in full swing.” As a result, Axiall has planned outages in VCM, PVC, chlor-alkali and chlorinated derivatives. The outages will drive up maintenance expenses above average and reduce operating rates in the first quarter.

Axiall has also initiated “a process to extract maximum value” from its Aromatics assets, but no timeline has been determined, Thompson said.

Carrico said the company has been studying the possibility of creating a chlor-alkali Master Limited Partnership as a means to access low-cost capital and generate shareholder value. Axiall filed a private letter ruling request to the IRS in the fourth quarter to determine if the chlor-alkali process creates qualifying income. A favorable ruling would result in a feasibility study regarding the creation of an MLP.

Financial highlights

Axiall ended 2014 with cash and cash equivalents of $166.8 million, up slightly from $166.5 million at year-end 2013.

Long-term debt, excluding the current portion, was $1.33 billion at Dec. 31, flat compared to 2013.

Full-year net sales were also roughly flat year over year at $4.6 billion and flat for the quarter at $1.1 billion, according to the earnings news release.

Adjusted net income for 2014 was $93.4 million, or $1.32 per share. This compares to adjusted net income attributable to Axiall of $266.1 million, or $3.93 per share, for 2013.

Fourth-quarter adjusted net income was down at $13.6 million, from $62.3 million in the fourth quarter of 2013.

The company generated $101.4 million of adjusted EBITDA in the fourth quarter, compared to $165.7 million in the prior-year quarter.

Axiall reported adjusted EBITDA of $436.3 million for 2014, compared to adjusted EBITDA of $672 million for the prior year.

Atlanta-based Axiall is a chemical producer formerly known as Georgia Gulf Corp.

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