Westlake Second Quarter Negatively Affected by Turnaround Costs and Outages; Maintaining $40 FVE

We are maintaining our $40 per share fair value estimate and narrow moat rating for Westlake Chemical after second-quarter earnings. EBITDA declined 31% to $247 million from the prior year as a result of turnaround costs and unplanned outages. We continue to believe that profits have peaked for North American olefin producers and expect rising feedstock costs to weigh on results going forward. The company should complete the acquisition of Axiall by the end of the fourth quarter this year, which we have accounted for in our valuation. We still forecast $100 million of synergies, about 1.4% of combined company costs, as per management’s latest estimates. If the company eventually realizes more than this target, we would raise our fair value estimate.