WLK - Earnings call transcript Q2 2019

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Corporation's Second Quarter 2019 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 the question-and-answer session.

and XXXX. conference ladies today, being reminder, X, August a gentlemen, is this recorded As

now to and would Jeff may I like Holy, today's over begin. Westlake's host to Vice President Treasurer. you turn Sir, the call

Jeff Holy

management Chief you. members Steve Westlake Corporation the Vice Bender, team. I'm today our second welcome our of Chao, and call. Chemical by conference Executive Good Albert morning, Financial XXXX President Thank other and joined to our Officer; everyone, and quarter and President CEO;

agenda by call Albert, industry. will perspective conference and a with The will regarding results. financial who our provide the operating open begin comments more few Westlake's on at detailed Steve then with a a will performance, look followed current

and questions. up we'll open Finally, will Albert the comments to add a concluding call few

call, to OpCo Westlake our partnership, master to ourselves Chemical. as During refer facilities. LP referred limited references subsidiary, owns OpCo to to to Westlake Chemical and Westlake is the LP, Any we who similar certain Partners olefins Partners Westlake Chemical reference our

These or to is are uncertainties. developments; and on products; risk raw and materials, The industry based statements policy to contain will in information balance factors utilities; forward-looking SEC nature other well management pressures; of topics results the to competitive that Westlake's Actual and and predictions of conditions; global industries in markets; availability thus differ to risks energy unrest; filings. discuss including: capital pricing is the cyclical operating Today beliefs discussed available economic volatility management. currently which we upon could regulatory assumptions products suggest supply/demand technological many made that access and in as information political expectations and actions; compete; for our as by factors governmental rates; changes trade based and management's certain or forward-looking subject going materially cost

Release This the is This press our available second morning results. of Press release section web westlake.com. page a details at of quarter document Westlake issued our in with

may of discussion hours therefore We reported second will of following numbers information XXX-XXX-XXXX. replay on our results. dialing posted XXX-XXX-XXXX. two be replay may by callers XXXXXXX. International access in numbers: A at the our of replay a may dial in August any access call assist Domestic following only have replay. quarter The The of today also you callers be today's beginning for the accessed presentation as the conclusion that speaks advised as the be call that are available note time call. this today, website time-sensitive should to accurate XXXX. code no the of And information this X, both Please is longer of

broadcast on finally page being I this advise web that through can an system our you would webcast conference Internet be live that accessed westlake.com. at is call

like the Albert to Now to turn call over I Chao. Albert? would

Albert Chao

share. you, release, Thank joining quarter you of $X.XX results. net per thank XXXX the and Jeff. second press reported In million gentlemen, for diluted we $XXX morning's of for quarter income Good our discuss us this and second morning, or ladies to

face of be and improved In over in XXXX this, sales of trade to with first first spite and on our challenging proved as quarter increased the sales global quarter. results second economic margins. growth of and second bottom prices of The the Westlake the volumes slower weighed quarter from the quarter that uncertainties international XXXX line

of feedstock the to performance continue benefit costs. in gas operational favorable We plants solid trends natural from and and

extends DaVinci, projects improve manufacturer expansion markets. We in roofing capital into our a compounding focused will reach chain that have NAKAN, as and composite specialty that in our integration PVC such deploying product and remain new acquisitions vinyls a on our specialty business

on detail turn now I Steve operating to to our our to more over results. provide like financial call would and

Steve Bender

with start will I by everyone. morning, Olefins good results. detailed consolidated and of discussing and financial Vinyls segment results a our followed our Albert, review you, Thank

Let results. consolidated our me with begin

reported second of income while net $XXX for of second million per declined $XX billion. $XXX quarter net $XXX XXXX, or the million quarter XXXX net first share, the $X the net income second For million XXXX, million to $X.XX income of per on $X.XX $X.XX from $XX of or of or quarter Westlake's compared million income we quarter sales improving per share. of share

major Compared products ongoing of trade slower results economic were global to lower the margins and impacted XXXX, to our quarter international primarily uncertainties second the and by prices due growth. from

with sales in the However, was which addition early led we and NAKAN compounding volumes global operational in Olefins lower sales Vinyls Compared segment, saw our facilities, quarter. saw a the costs. segments, the higher acquired a to Olefins quarter continued performance we XXXX stronger of of in first volume our both and to first feedstock fuel and of due margins which by and our strong demand business higher PVC aided

Vinyls benefited volumes construction of America. product businesses, as our we delayed the much addition, weather of improved downstream winter start margins and in the from in In extended North season even

on the has resulted of calculation per $X.XX $XX have LIFO audited. in would unfavorable Our not to an FIFO estimate been, or pre-tax method. been of only share the in This what accounting million, earnings utilization and approximately if is we an second quarter the method impact of reported compared

our caustic the of prices prices in sales review especially our segments growth in pressure continue market performance caustic for segment. and PVC Vinyls Vinyls and for global on ongoing as resin. to saw second our two to XXXX, sales with lower the export soda starting move soda, the slower let's uncertainty In the segment Now, quarter trade of

of construction season, North Vinyl was start noted I earlier. by the further impacted American late addition, the building the segment and In

from XXXX primarily $XXX from million. sales volumes increased income Vinyls' for PVC quarter operating prices $XXX and partially offset and caustic million, For of downstream the quarter, businesses. our lower NAKAN XXXX million decrease $XXX to other second second decreased vinyls operating the products is due resin, This by soda income of the

downstream million income the driven income acquisition operating operating higher largely caustic $XX our building results construction integrated volumes of and is prices. as got increased underway from Vinyls' primarily seasonally businesses, lower soda million season improved quarter first lower to and $XXX by the second by vinyls sales due of This increase million. in $XXX product offset costs, restructuring partially with quarter and

margins XXXX. Turning uncertainty to Olefins quarter entered trade and perspective XXXX to the our segment. of pressured and that industry market capacity the XXXX, prices an the ethylene when has new since the quarter of second supply/demand From production ongoing polyethylene second and compared in has the

our operating million, by income income of million the due lower second XXXX's of quarter of operating the In XXXX, of to decreased $XX quarter $XXX the Olefins segment second $XX from prices. strong million resulting lower plants partially margins performance from higher volumes, offset feedstock were lower These lower polyethylene and and sales our costs. of polyethylene operational prices fuel sales by driven

increased quarter feedstock $XX XXXX, XXXX of operating $XX saw Olefins' as income and products million income quarter fuel our operating from good we from million for benefited costs. lower demand first Second and

to million $X.X let's balance the second At sheet our cash Next, $XXX attention and debt billion. flows. have total equivalents of and the of quarter, of cash cash statement and the turn we end of

$XXX operating in U.S. Geismar and operational activities million. in expenditures fourth be investments continued further debottlenecking were vinyls our $XXX expected with expansion Second capital integrate to in quarter of from million, Germany, our our we cash XXXX the were Louisiana XXXX, half In strategic of production XXXX. to flows the the first while chain quarter

of joint chain. into with ethylene vinyls Our quarter end add our started further Chemical at integration up and venture Lotte the the will second ethylene

roofing opportunities throughout in growth We downstream continued NAKAN have have that as products such acquisitions this and invest DaVinci to compounding businesses. also with our bolt-on expanded year specialty

current chain in will that integration projects that seek will in In enhance our our position globally feedstock market advantaged capitalize invest acquire to conditions, technologies on our opportunities business. leading these and improve further cost we a will and that prudently And position.

global manage aggressively to to our outlook. coupon These an to X.XXX%. we costs Subsequent continue the our XX-year of future proceeds economic used of current growth. will will attractive million we of at fund always, issued quarter, given close second €XXX be the notes the As

and gas to have ethane third in the prices As continued forward, we decline look natural quarter.

the producers. pipelines North and NGL has increased industry, accompanying the by capacity cost enjoyed American supply highlighting beneficial our New in fractionation position

stabilized sales for in In as been United the reestablished. provided our States improved the patterns has prices Vinyls to easing and levels logistics river caustic of have appeared soda have more segment, normal trade

season rebound third typical the construction it carry weather, winter delayed While North in demand America from in into due through extended the believe the to quarter. have benefited was will and we

expect we XX% effective and tax the full purposes our cash XX% For be approximately of XXXX rates to respectively. rate year tax and modeling for

million. full ongoing capital approximately outlined integrate further cost – we CapEx be $XXX to our the investments and to our I as business, our reduce position capital year expect Given

call comments. the to some Albert? turn I'll that, With over make to Albert closing back

Albert Chao

result delivered a Steve. spite challenging environment. in of quarter you, a Thank economic We second solid

opportunities new and our We will our our plant upgrade continue bolt-on our differentiated business to efficiently, and integration, improve evaluating drive in costs to platforms chain lower, and grow polyethylene. investing be prudent PVC while in

formed market a the has our corporate a mention is had environment I by that values. the wanted social heightened to with core that in awareness morning -- about This heightened responsibility the to long-standing Westlake commitment

our packaging and and emissions doing improving reducing and part the of waste, in which includes responsible recycling. commitment efficiency sustainability, gas reuse greenhouse supporting That energy promoting includes

others. Waste to those facilitating are environment Plastic initiatives, actively We and including also Materials for in Alliance industry's Future Recovery the of the the End

very to our for listening morning. much earnings you this Thank call

call turn the to over I'll Now back Jeff.

Jeff Holy

you, Thank Albert.

ended. at like begin Jimmy, you call hours a has end be again this that available questions. replay the We'll now after we of to take of I Before questions, that the will provide number two call. taking will we remind would the teleconference

Operator

Aleksey Instinet. first [Operator you. question Our Nomura Instructions] from with Yefremov comes Thank

Your now line open. is

Aleksey Yefremov

morning, you. everyone. Thank Good

and capacity. caustic system increase production Will your to this expanding current You're configuration? your chlorine relative vinyls soda

Steve Bender

increase production that years, -- adding America. later amount in This none adding small start will but in following in production is that the PVC we're any none PVC in it current Alex, There's the caustic we're in America. a will but not a Europe expansion. North our North

Aleksey Yefremov

those issue Could the you keeping -- for planning those full And in year Steve. Thank explain on to And you've guidance future guidance are you, you for providing rationale the years? recently. chosen providing guidance?

Steve Bender

a one-time gotten needed marketplace. relative we see to we dynamics the we to the to saw guidance have guidance. did stale seemed because And felt, something was that This do that in the we

just this that So, do one-time you only. will we expect I can think

Aleksey Yefremov

Thanks a lot.

Operator

you. Thank Kevin question next from comes McCarthy Vertical Research with our And Partners.

now line open. is Your

Kevin McCarthy

Vinyls the morning. quarter. you was could in Yes, good volumes wondering -- if I your segment

basis. I of think on up as But activities. X.X% you year-over-year includes some being that presumably them acquisition a reported the

perhaps that acquisitions been might experienced? weather and without speak you you could have to that us the So impact tell what

Steve Bender

have would largely in that. the you're some driven certainly this sales year. earlier made The been we was quarter Absent to by Kevin acquisitions contributor similar step-up So that XXXX. volumes our the right. levels to NAKAN significant was of a same

a the of during impact impact tail winter as second of was to been the The to the delaying weather the sell products certainly at first recovery the back normalized But weather end as since normal of we've weather course result good the ability its our to a and quarter. patterns. quarter noted, seen into the returning we has level the

Kevin McCarthy

Okay. And the then olefin question side. I guess had a similar on I

What there basis. that year-over-year volume XX% up Your of was level or increase? on a so drove

Steve Bender

certainly increased. Well, production our hasn't

So maintenance that and was prior period strong issues operating sales periods. prior driven by was We part see of didn't this periods. issues in largely but demand driven in activities turnaround the in by

Kevin McCarthy

very I see. much. Thank you

Steve Bender

You're welcome.

Operator

our from next question And with Neel Morgan comes you. Thank Kumar Stanley.

open. is now line Your

Neel Kumar

you question. could the of modest of my the taking second help quarter levels levels there in It was first prices. I and for step-up about appears XX% margin if from olefin quarter wondering is Thanks just a volumes improvement to Great. bridge XX%.

should year? the lower And of cost? these level of margin in from both a half are we the So feedstock similar expect second

Steve Bender

downstream largely an the you was one Neel things. when at fuel as And also seasonally lower as purchased important piece lower costs couple quarter our restructuring earnings certainly well and products So of in quarter it transaction-related by costs. some and that, was of versus a we two. also ethylene driven look higher businesses Certainly had

Neel Kumar

Thanks.

Steve Bender

are You welcome.

Neel Kumar

outlook your domestic I prices in in terms would June, And was the second PVC half in July. say prices then embedded flat it year? of $X.XX up the of in what's in go PVC

would be So any your outlook there color helpful. on

Albert Chao

Sure.

we I increase pound are at think to consultants June. a where be in industry it after $X.XX flat prices looking the price the see relatively

the is So of flat. is our rest year relatively for outlook domestic the price

Operator

Thank comes you. next Deutsche Begleiter And Bank. David question from our with

open. is line Your

David Huang

David is first I this guess pricing. Hey, Huang David. for caustic here on

the American meaningfully South demand in inventories the expect additional the to second here some significantly more improve take will Given when so pricing to do producer time half? you reduce

Steve Bender

lot of Brazil a Well, have issues caustic certainly I the the in that we issues think seen were surrounding addressed.

more pretty running begun and quarter They've rates. rates to been Alunorte rates. to those continuing the at to up Specifically second operating elevated step throughout has up normalized ramp

front. seen So change seen we've as elevate the of We've earn-outs of improving a ton. for consultants on that forecasts some caustic that demand $X the in index their industry

So I should to Brazil. there relates as some Brazil. competitor a note also seen that also of specifically we've in we've it drivers seen positive course, issues And, operating have

Of that year Those and seems then brought seem into course, issues to Indian back Bureau of issuing have raised now They're demand Standards. in India, market. we've permits last to been the also to they that importers have addressed. import traders. And seen the

mentioned see prepared as And of an we've So $X earlier stabilization my you I on outlook a in seen table. prices. ton remarks caustic the of

David Huang

in in opportunities. quarter. some interested buybacks million $XX you had you're you allocation capital on said the bolt-on And then And

your So areas when be of this M&A year? capital what the of potential I what priority some you're allocation focus opportunities? And would then would be evaluating guess

Steve Bender

Well, continuing DaVinci Europe. opportunities certainly that look have comments, that the the debottlenecking underway will acquisition. certainly and for conclusion. continue as acquisition we their NAKAN Those you well in can to as States the see my in as in we're We United initiatives such both

return. also investors are aware a need We that deserve and

continue buybacks. form dividends we to So that the from share and to opportunistic return to time look time in give of

look capital. we a And organic to includes well As function I'll say opportunities the investment grow appropriate appropriate of the of and that as getting as opportunities. return acquisition-related for it's

David Huang

Thank you.

Steve Bender

You are welcome.

Operator

Sachs. from And our Goldman Bob with comes question you. next Koort Thank

is now line open. Your

Don Campbell

is Campbell This Don Bob. on for morning. Good

You how levels guess commentary kind second June terms a average of little you of had volume more trended Can quarter give granularity or have more a on trends. July, in volumes interesting in I trends? relative demand your to maybe

Albert Chao

Yes.

downstream seasonal construction I the Olefins the building in that think period with for both Vinyls help in segment demands are products. and segment the strong strong also

think now also the major from second reasonable. industry the any demand to barring seem on I So half disruption the and further by be world consultants trade disruptions, espoused

Don Campbell

like prices Got It caustic America sustainable in seems it. export And maybe in it maybe did the guess stepped what the North export end on improvement second drove that the above America It of positive I How that other quarter. is some price prices? guess North feels export up I price. like by spread? And soda show improvement regions.

Albert Chao

export market somewhat that Yes. volatile. been Certainly has

export some kind half as I think we for and And South especially earlier in pricing demand in year have of improved, over Steve in stabilized year. the some America areas. improvement and said over first of this last

the price demand So reasonable. And seeing expect improved we we are be being to the also. gradually

Don Campbell

it. Thank you. Got

Albert Chao

welcome. You’re

Operator

Thank Markets. from Viswanathan Arun our RBC you. question with next comes Capital And

Your open. line now is

Arun Viswanathan

Hey, thanks. morning. Good

the to soda index it looking of I so soda your pricing? momentum But Just the some to if back And the in seen positive or you're caustic catalysts $X on guess improve we've Thanks. the you what slightly would that developments. weaker? outlook, going July uplift some for consistent are characterize was with expectations, maybe caustic

Albert Chao

has And are cost of high think said I prices those breakeven producing regions the the as price prices. some I Well, export stabilized. earlier,

that U.S. the I caustic impeding there's with improvement – think were globe demand so well, the think water and should levels earlier – help issue shipment increase pricing improve of on issues the has economy the we water And side. around And the some mentioned the long and So high resolved. there river on in as being logistics U.S. what with side as would Steve that around

further industry further the some not price in be increases. there's increase forecasting I down down think July, – further year, the and only but think there'll are in prices are movements, more potential stabilizing. of the I consultants So And price

Arun Viswanathan

or that's improvement? In any We've year's for here, expect Steve and a you on the is outlook of over couple lot. supply back olefins the we seen pull come pressuring continue pricing last Would for and you from there? referenced decline there to margins costs margins. polyethylene that potential markets also your pricing Thanks. feedstock What's

Steve Bender

certainly an into seen outlook we've observed the see Well, And as additional growth. we new mentioned economic certainly continue all uncertain the come certainly, capacity terms the of to I in reason, market. we is pounds as

pressured And the certainly, and of there. so that June certainly July. pricing over is month the has prices downside And further

at you lower forecasts they terms do of in trend show If the of consultants guidance look some some rate their year. the there in

at show IHS, declining you do they look If further risk some prices of this year. later

Arun Viswanathan

you market and potential there Just on it lastly, improve or Lotte run think you advantageous is full? when more the about back startup, Thanks. cracker the could potentially is the a supply, throttle production there to that

Steve Bender

as going imagine going – a you'd Certainly, ethylene that they're It's and we're PVC into And is MEG. cost-effective but not that Lotte their using not our PVC into partner going very cracker. into polyethylene. using

expectation full respective I that certainly, rates to that partner plant to we'll of our we operating so and our think And to ramp derivatives. like the that And both rate full rates. is into send the up would see

Albert Chao

prices. I And margin a add price today's ethylene reasonable in at ethylene also producing to those want ethylene with there's

Arun Viswanathan

Thanks.

Operator

Thank our Barclays. Leithead comes from you. next And question with Mike

is now line Your open.

Mike Leithead

Thanks. Good morning, guys.

Albert Chao

morning. Good

Steve Bender

Good morning.

Mike Leithead

I guidance you in mostly half second But on occurrence. which implied vinyls one-time appreciate even a July I the gave when was bit earnings range assume side. I a the the is guess bounce of a just that it

walk two half or in considered you of so get the improvement that we've maybe So seen one second through the factors half? you to you over can to first just far what that

Steve Bender

both think speak vinyls we you I chlor-alkali earlier, the to front. us Mike on heard Well, positive trends as see and

behind those late that in demand We in I the issues regulators weighed think XXXX and stage. Brazil in market. at on in this issues to with the us related related see to India of we dealt early Some XXXX and

this into going have year. we a view constructive the forward of more rest So

Mike Leithead

more That's a improvement size increasing give given could the vinyls an the forward business in products of look more of And within this exposures then to about quarter? just the you you your this portfolio? little it. maybe business building is And helpful. talk about might area Got going financial this

Steve Bender

Certainly, Mike.

As these you a we acquisitions. And and continued the give of we is the, look has capital acquisitions DaVinci. it an further business at see that forth to put attractive the that business through consideration. It NAKAN can with to grow as is we'll business

Operator

next McNulty Thank you. John And Capital comes Markets. from question with our BMO

is open. now line Your

Bhavesh Lodaya

This morning. Good John. Lodaya Hi. for is Bhavesh

Albert Chao

Good morning.

Bhavesh Lodaya

strong the And can demand? now? generally export First discussion of polyethylene, follow-up are particularly of touch all, you quick a then, domestic just that much on inventory right around versus was seeing in the on volumes how levels how polyethylene you

Albert Chao

Yeah.

I think flat. domestic demand in is relatively the U.S.

inventory. I export Thus, helped demand the the inventory careful the they coming with sales think I to in values to low volume really relatively industry. very point of expecting volume side. think has capacity holding the from a lower, more customer total up, customer trend prices reasonable are And all view in are for – so

So the to customer I the level inventory think average low is side.

Bhavesh Lodaya

have chlorine lower first. higher follows. economic And caustic on Caustic slows economic you chlor-alkali to prices if kind down demand sometimes at look even It cycles as Okay. side, chlor-alkali production. turn cycles the of leads then seen downwards historically, we

So where are phenomenon? is, curious it seeing to you does appear weakness this of or know you we I'm feel cycle. the question this are we signs seeing structured are The chlorine. temporary, in in some is any

Albert Chao

Sure.

And PVC hence production the demand the winter Hemisphere PVC of hence chlorine chlor-alkali less generally chlorine tends chlor-alkali third to for the Hence stronger. Northern slows is and but the in the Northern think activity second the only building construction I more PVC we is season, as up. down. demand and go quarter. of demand season U.S., in There's not in less production, price with move are in for less our With the caustic some Hemisphere, stronger. seasonal, and for

view, view, long still business the is vinyls from demand there of a think as PVC the the we and so really with issue And think limited along issue. business. increase, It's capacity seasonality largest a same cycle a the more I continued the don't caustic cycle growth, of for I growth amount business cycle point for see of seasonal point and

should the we forward. trade any Now go that get global issues, see economic from should as tighter the slowdown tighter vinyls we and cycle barring

Bhavesh Lodaya

Thank you time. for the

Albert Chao

You’re welcome.

Operator

our question you. Citi. Thank P.J. from next And Juvekar comes with

is line Your now open.

Eric Petrie

Yes. Hi, Petrie on P.J. for good is morning. This Eric

Albert Chao

Good morning.

Eric Petrie

historical ask to averaged half for your over what half. I and has volume growth second wanted first derivatives chlorine

Albert Chao

more are same. or usually less It's they the

We fourth quarter. times have and At worse a or could second surprisingly demand depending the quarter depending quarter a be the on fourth on global surprisingly stronger weaker third first the quarter economy. and better weaker

wetter year third And we the has quarter. quarter. because as did later. weather This start quarter the a seasonal Steve U.S., much improved quarter. weaker And slowdown home it construction it of and the hence in mentioned, the the not expect season the in was first And until winter longer fourth the second into in again

Eric Petrie

Okay. Thank you.

the economics PVC the you producers what can for Secondly, ECU? and has of in impact on the talk about integrated supply been China

Albert Chao

in of as Well, polluting the production. some down were Certainly. of heightened China, shut the because asked know or awareness reduce may you environmental either to high-cost plants and

are limited which has have been and in whether they economics -- the or integrated depending and side So well. you not producers' productions vinyl non-integrated chlor-alkali both non-integrated, on

And PVC think than has earlier way mentioned the a The who at China are economics levels interior breaking from ones returns plants. the mostly ECU -- coastal were the for coastal integrated the level coal in the to better all probably I we breaking-even plants.

Eric Petrie

Great. you, Thank Albert.

Albert Chao

welcome. You’re

Operator

question And Thank next with from UBS. Roberts our comes you. John

is line Your open. now

John Roberts

you. Thank

the a of get of How Vinyls -- to Just were from weather at off the the much expectations quarter were beginning the in the quarter. first the volumes in impact your sense segment? what

Steve Bender

to very in we first an we do to -- did season Albert we up say, weather typically a increase half. volume had year. just than quarter were look we in have I the we you first if we the past weather But hard X% this in -- stronger certainly, the stronger because volume it's pick think half changes second than did as But year-on-year. we to in the know quarter noted, quarter Well, than quarter-over-quarter. at able gauge John had the seasonal second the a But you good as the in quarter-over-quarter,

John Roberts

ethylene impact on already economics cracker material it the won't the the Is you'll than have different Lotte doing market-based what have purchasing at current Will you levels? exercise the the option much that interest really and be small in your until market? economics you're equity any relatively

Steve Bender

beginning has we're the Well, -- started just plant up.

at And rate at full stage. this running so it's not

we're relative second the as is interest the third better rates. that into in economics, of be the in volume full benefit will quarter ethylene and still taking up so And is than the plant. to which quarter we purchased ramping ownership take But the any we certainly getting just producer marketplace in the our

John Roberts

Thank you.

Operator

you. with comes Jim our Thank from And next question Sheehan SunTrust.

is line open. now Your

Jim Sheehan

Good Thank you. morning.

Steve Bender

Good morning.

Jim Sheehan

Could you third and talk what quarter quarter in for fourth you about expect please? turnaround cost plant the

Steve Bender

the plants since move year of impacts and Jim, have activity schedule the of so of costs not second we the lighter half of to based the be we on planning course decided because of the we've the been quarter give will throughout throughout as And the forward these. the frankly than the the many turnaround quarter-by-quarter half So, it we in into kind course look do across first they business, But turnaround year. has year.

-- So lighter turnaround earlier reflective schedule we of of guidance course. we so tend the a was gave to give

Jim Sheehan

might the sense you. and on acquisition, the And of give what the be? a could for Thank business Okay. EBITDA contribution scale us you this DaVinci

Steve Bender

it was very Jim, small.

going it's you're your looking to numbers at that to model. be the So not material in

Jim Sheehan

you by segment? would that And break out in terms business FICO how your impact, of

Steve Bender

a Vinyls impact. mostly It's segment

Jim Sheehan

very much. you Thank

Operator

Fermium our from next Mitsch with Thank question Frank comes Research. you. And

open. now is line Your

Frank Mitsch

morning. you. Good Thank

being following on first compare up halves? the lighter turnaround second magnitude of order Just half, the the than the what's you half if the to

Steve Bender

This is Frank. Steve,

turnarounds quarter-by-quarter We vary they haven't got into quantification do those the because year-over-year. of

have they of half the the say of all than half the they would year. second for first in be is that year the so I will And lighter been

Frank Mitsch

here roughly Okay. and Can the completed? facilities And, the related. both in some far of has quarter rates were M&A year-over-year think obviously, you that July they seeing so where sequentially operating are second your during better for you what about were and volumes businesses as both your

Steve Bender

Certainly.

Albert Chao

rates first doing operating we turnaround away generally information taking much some as the half half. the our some mix. Yes, than after that than in had are better see. are better we mentioned, the But industry We Steve turnaround first activities industry operating --

Frank Mitsch

All much. Thank so right. you

Albert Chao

You are welcome.

Operator

question America. from our you. Bank Steve Thank with And Byrne next comes of

now open. Your line is

Steve Byrne

how thank Yes, margin? chlorine into, you terms those business that would you have? the in How chlorine of -- would can all the among you of you. And downstream building your out and you that represent does products volume EBITDA products rank what the of your move rank contribution downstream products molecule capacity that

Albert Chao

our NAKAN's compound products products, the global are they polymers. and And our downstream the serving have Well, pipe are of American but domestic important like primarily world. the not revenue also products market markets world. all trims an billion uptake window $X that In are more in market American our really sold spread over a product and North downstream and whereas sidings, the profiles. over all is those business to the over tend with building are But pressure comes we export and North be for the

Steve Byrne

consider any segment? new separating you vinyls separate see that a opportunities as ever do into whether just And and products would downstream to out more you move

Steve Bender

couple in can are that of our Steve, NAKAN product So, vinyls the certainly further acquisitions. this business transactions you see last and select think integration that year it's DaVinci business. provide with for we I attractive can And in in

can we find not of business. continued the that there suggest upstream extent the our we the to will. side that opportunities so we've doesn't And focus on That

vinyls mentioned, now. in we're chemicals the our assets as We, I of And do. debottlenecking chain course,

at generally EBITDA a is over of that. It looking an in it time. stable And balance tends important it's So business. more to be

more how breaking more of ours. as of to thought consider business about business because, give noted, we when it that size so something And that is give thought growing a to and it's transparency can that we'll Albert we provide

Steve Byrne

Thank you.

Steve Bender

welcome. You are

Operator

Hassan Thank with you. question Global. And Alembic Ahmed from next comes our

Your line is now open.

Hassan Ahmed

Albert morning, Steve. and Good

Steve Bender

Hassan. Good morning,

Albert Chao

Hassan. morning, Good

Hassan Ahmed

are question said, on-stream. near around to supply you the complete Lotte, globally they sense. surprised way it advantage with a on rightly But come they with to China. that plants Albert, JV saw bit additions. for online with cost are we naphtha-based way I'm sort MTO Like of a medium-term MTO It's come sort two the just guys makes economics the of have recently you economics,

near to Another the in pipeline two be term. the in seem

So If current non-North to view? view what's medium-term near- your economics American about fits, global and what's uncertainty facility? this your

Albert Chao

question. good very a It's

As you the outside a in olefins North of process is that China country more -- mentioned be of that America, to have seems capacity. adding China

Some import of coastal methanol been are the trending well some the MTO be doing are has plants higher price but seemed to plants region methanols. methanol those on price, to the and because coal-based of MTO methanol lower. base whereas not the MTO that They building plants also feed have

ethane-based crackers U.S. from based primarily ethane import the building is and on some China propane,

So that crude oil side and those looking They planned. some plants are are. seen be -- the olefins be some are olefins to And coming to of at so not aromatic will producing chemicals primarily much the being paraxylene, good more side are though there even there up. investment the how chemical

tell to self-sufficient. they I They will given will And the be more China's So competitive on cracking think just capacity oil. time put how ethylene. want normal naphtha just based be

Hassan Ahmed

Very Understood. helpful. Understood.

terms quarters we've things. Westlake Now as is the a Again follow-up more side and NGL trends of on last in the of margins. the domestic pricing over the one favorability right couple associated seen of of of and

being margins ethane-based times times advantaged. margins at seen at butane-based You've advantaged, being

what's run remind gets can But ethane out. you me you lowest have? to? you flexibility mean can I level the of take down you guys I flat could disadvantaged, ethane level know So ethane that if again the

Albert Chao

Calvert propane City ethane-based cracker. are We we was Well primarily a crackers.

it but production. can revert back reduce propane will to ethylene

We ethylene Lake have plants two in Charles.

production. some went crack naphtha. will reduce could we up them or to naphtha, propane ethylene of we XX% propane to even even One and if Again,

total at produce ethylene. feedstocks And attractive. net-net the had will the propane all cost, been looking save propane though company benefit that. depending to maximize you much may months So different you much try was some even some but less in the to we on when And using recent the for margins feedstock we're we

ethane fractionators the coming there up or butane -- is we'll still I for year still today the more attractive supply low -- Steve next this as market. and price very which pipelines And ethane I think is summer ethane butane, produce price said U.S. are barring or is more most to raw We'll material. year. the think

Hassan Ahmed

Very helpful, so Thanks much. Albert.

Albert Chao

welcome. are very You

Operator

And Thank you. with Jonas Oxgaard question from Bernstein. comes our next

Your line now open. is

Jonas Oxgaard

Morning guys.

Albert Chao

morning. Good

Steve Bender

morning. Good

Jonas Oxgaard

you if mind. questions Two don't

them at going that PVC believe four-year of otherwise? because prices crackers you -- of China economics, margins coal a they is Maybe But economics though high. increased flex PVC coal a The the bad for naphtha economics. in seeing because this now I on is are or touched -- it's into can't look One keep falling. just suggests is rates even you Chinese doesn't

Albert Chao

No.

high-cost the have -- capacity explosions or some taking some There have off and didn't down. We take market. plants production China being certain been low plants seen reduced in shut of the unfortunately parts those

based. So moved that's plants catalyst. And economics new you know now PVC/VCM even yet. a price that's resolved coal carbide a PVC coal-based until on any not not as on of has spot China mercury permitting reinvestment has VCM though it's And up plant really right they're because moratorium

Jonas Oxgaard

question. different completely A Okay.

they by sustainable the big the are And as pricing that are set it so if be you have prices not just whether related is debate and well? sustainable like course, a which been has or is how prices So to Asia the U.S. margins polyethylene moves now polyethylene for Asia so the looks seems high European of Europe, Well Asia perspective over down. right on because it to sustainable. European Do question prices U.S. is long? or to

Albert Chao

question. good a That's

three trade be polyethylene with adding Europe be producers the with plants China, next U.S. tensions over XX%, that have America last years, will will South areas capacity into targeting. the the and XX% U.S. two As are years especially several we

So the have impact on it some market. European will

trade will trade tariffs know if Europe putting don't have the is U.S. imports. auto European we barriers what on especially However,

So tell. will time

Jonas Oxgaard

Okay. Thank you.

Albert Chao

welcome. You’re

Operator

our And Blair Thank comes you. Holt. question with next from Matthew Pickering Tudor

Your is open, line now

Matthew Blair

Hey, good morning, and Albert Steve.

Albert Chao

morning, Good Matthew.

Steve Bender

Good morning, Matthew.

Matthew Blair

have XX% spot So past prices about caustic just Asia month or the in off two. fallen

the around you? in year? U.S. roughly it's half of levels. they're contracts think January to this Does likely you concern think I the weigh Do back on

Albert Chao

the contract price. less a But big and prices would of because other are that Well, on parts prices volumes some spot to have a impacted they are lot – basis, by the not long-term which – certainly are so could think some spot spot I exports impact. and it's

for world or demand economy long so further reduction caustic fuel the the see improves we And going is not improve. around through

has demand mentioned with on plant the import other we earlier American issues, As the South Alunorte increased. issues and

So not and they helped specific up could now will global the have then regions, every go prices But in pricing and the of improve. but prices down be determined dynamics.

Matthew Blair

QX? Sounds you similar about a number good. million mentioned have Do building for the And to $XX products a headwind. then in million $XX the you first saw year-over-year quarter

Steve Bender

we season the of season start the construction in in Matthew, second in saw As quarter. the delay – of because the winter impacting the pickup beginning we said

So we're it you And year return we've quarter. of a the improved. I of as the not business. would season relates that specifics have contributor from the and to NAKAN portion business products seen construction the volumes certainly in over the were breaking been first with building say downstream the the that has of that, our meaningful course can But the additive see to of second that out half

products say So that very well. I performed has would that, business

Matthew Blair

you. Thank Great.

Steve Bender

You’re welcome.

Operator

question Jeff with next our And you. comes Thank from Zekauskas JPMorgan.

line now open. Your is

Jeff Zekauskas

much. the Lotte me very cracker much the how to you Can contractually of accept? obligated of Thanks volume you're remind

Steve Bender

So Jeff, own We this XX% the we're to of stage XX% the production. plant. at the take ownership of obligated of

Jeff Zekauskas

work XX% ramps it exactly up? plant to the And how take does as certain take as the Do you have the you it is scale before or volume? of ramping a up, to that has to get volume

Steve Bender

No.

ramp-up share. our that we're reaches rata As taking during commercialization, it pro

Jeff Zekauskas

your In equal? sequential pro affect that does taking rata all EBITDA things share your being positively

Steve Bender

of we've pounds been economics sequentially. because the benefits, we'll certainly in market the have on Yeah, those Jeff. producer merchant-buying that because we certainly portion Well, that own

as be be That an the So additive to will go we that additive EBITDA. will forward.

Jeff Zekauskas

that? quantify you Can

Steve Bender

yet. haven't We

Jeff Zekauskas

your than a of from your Why sold billion. little of Why at sold your did looking billion cost in little that? less $X.X income Also statement to up? Okay. go $X.X bit goods year-over-year more goods a cost went bit was than

Steve Bender

think that have mix of change businesses products. businesses of part in Well, it's the final that our of addition think the to when we about I mix we Jeff. And vinyl the of course downstream the is

Jeff Zekauskas

was words other in it acquisition So effects?

Steve Bender

part of is. of for And purchased Part the businesses is it materials also well. as of all it certainly

Jeff Zekauskas

– price ethylene little higher, really else is but ethylene everything a now? I little a prices maybe lower maybe bit mean, are purchased Because

Steve Bender

but volumes. Well, sales higher remember had also volumes we've

Jeff Zekauskas

Yeah. Right.

Steve Bender

cost your well. So when And you purchase quarter-over-quarter materials have up of sales sales you're volumes as go remember, year-over-year higher have if looking volumes been up.

Jeff Zekauskas

How much polyethylene of do total? export your you

Albert Chao

the less think to low industry We are -- we average. and below mid-XXs up Yeah. moved than The export in industry that. the I

Jeff Zekauskas

Pre-or XX? above

Albert Chao

yes. XX above We're

Jeff Zekauskas

you looseness market? the see snug, or particularly or And loose in the tight polyethylene you of you this or talk Asian Yes. do can that? Do about view how

Albert Chao

of also Middle market big and But Asia Well, market. many outside East. China are a is the in there the still in producers Asia

market. So does volatile it's the But move pretty huge price a month-to-month.

Jeff Zekauskas

How Is about China? China loose?

Albert Chao

for the with China now headed are Yeah. down carriers producers. U.S.

U.S. producers; then be avoid to to to large shipping this they're those tariffs refunded. by But trying U.S. they're the to can China. think Unless trying and I exporters for China. is sell

Jeff Zekauskas

decrease China the Right. But there I to U.S. doesn't a China in sell be less China… China. understand polyethylene some place? -- There seems -- domestically is the looser market to

Albert Chao

Yes. Yes.

and well many Chinese volatile with that and plastics industrial demand been as only for manufacturing, reducing has polyethylene. not been slowing the economy think I down the has

Jeff Zekauskas

or X% polyethylene X% globally. know the rate about what? is I think year, growing that Do do at think talk market X% year people don't growing you is to this at it's you like lastly guess, I this

Albert Chao

all it year rest But through less global probably don't than the rate. the We to with the of know be barriers what the the and think trade we're do. going issues I tariffs will Well, think only year. and halfway I GDP

Jeff Zekauskas

much. great. so Thank you Okay,

Albert Chao

You're welcome.

Operator

the At this Q&A has there session ended. remarks? any now Are time closing

Jeff Holy

today's us our call again, for conference call. to our participating you'll next results. join discuss you, third in for We again Thank hope quarter

Operator

Thank Westlake earnings conference you Corporation for second quarter Chemical participating in today's call.

be following available XX:XX time may beginning has both the is callers code be by access on access International at two As calling p.m. and August the replay after a call XXX-XXXX. numbers. accessed accessed until for XX, be should replay dial hours XXXX. can code Eastern for callers reminder area The The may replay ended Tuesday Domestic this XXX-XXX-XXXX. call XXX the numbers XXX-XXXX. will

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Westlake (WLK) 6 Aug 192019 Q2 Earnings call transcript