WLK - Earnings call 4 2023 | Westlake Corporation

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Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation Fourth Quarter and Full Year 2023 Earnings Conference Call.

[Operator Instructions] As a reminder, ladies and gentlemen, this conference Is being recorded today, February 20, 2024.

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

Jeff Holy

Good Call and quarter to for year Jonathan. Westlake and to Corporation results Conference discuss XXXX. morning, you, welcome everyone, the full Thank our fourth

by President and Financial CEO; today I'm management President of other Chief Chao, team. our Vice Bender, Officer; and joined Executive and Albert members Steve our and our

we During Performance PEM which which Materials, to as to and or Infrastructure we and refer we refer and our to or will call, HIP Essential the X segments: Housing Materials; Products. reporting as refer Products,

call Today's open After conference discuss regarding Steve who add we'll call will to results. begin the concluding then Albert which, with Westlake's questions. with Albert, will few our will operating and a comments a and will financial few comments, performance. open

carriers. quarter fully on financial a as During claims certain $XXX epoxy insurance identified of net in X charge of this the recorded charges to on related well and to to that We business, exclude call certain per currently as being XXXX, charge impairment resolve we million million covered noncash to by call. these company's the items not of liability References our release are $XXX earnings the earnings share and from a conference operations, our income income impact as EBITDA, of this the identified refer items. excess fourth

the will section in GAAP financial is to our provided regard to Investor in be call our is our results this financial on reconciliation A of release, measures. non-GAAP in made of using measures Relations which website. business comments these such, these available As financial earnings measures underlying non-GAAP

actual suggest SEC other made Investor filings, contain as ended uncertainties. or discuss that that expectations, the thus discussed these or certain and management management's XX, based website. subject to which and learn to more reviewing results you forward-looking differ currently information uncertainties about are our and December XX-K these available Today, forward-looking XXXX, available assumptions filings. by information beliefs Form in statements lead We on risks Relations These is as for to management. Westlake's factors risks our going year topics to that These predictions also encourage are on and to are will could SEC well by is

This the year with of Press morning, website a issued Westlake available details is fourth press in at of our section and This release Release quarter document results. full westlake.com. our

be this be Relations have accessed We website. replay can A found an hours on beginning the website. conclusion following available of Investor will X section presentation, also included the Westlake's replay may our earnings which today, call via be today's in This of call.

the call of you're on therefore, that note as this advised no XX, today, longer any time February may replay. speaks be of information Please accurate XXXX, that as of reported information time-sensitive and only

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

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

Albert Chao

discuss us everyone. fourth XXXX and quarter Thank year Good We appreciate Jeff. morning, full to results. joining you, you our

$XX the of for billion. quarter we and $X.X items of $XXX $X.XX of identified of or Excluding sales fourth share, on XXXX, net EBITDA the million income million reported per

international quarter increased prices X% fourth quarter revenue fourth period to our North sales that year in operations. to with below we compared was due lower PEM partly strength by of lower the sales sales overall sales the our segment, American While pleased demand XXXX, ago average the volumes are total offset in volume

China in economic China, Europe The into declines a epoxy which driving along some XXXX declines in were weak weak the Europe with impacted were Asian Asian ongoing to very driven price and and business, base regional still increase exports significant in energy in additions. a additions, high which demand, when priced operations, our volume were capacity environment subsidies from stimulate price primarily in significant costs most competitors and weak with exports, by part and received were time export European other our due our to at new as most These global volume in in volumes Asian Asia. felt backdrop energy macroeconomic met Europe war and aggressively were a pressured were epoxy relatively capacity regions. These were the Ukraine. European imports Regionally, by

global European Netherlands remain noncash a for experienced epoxy resin business profitability. in and decline our we the quarter. our market in charge business rates in the along current impairment sudden reflect base with of As pressure, epoxy fourth in to under result changes these a To a our operating factors, outlook sharp these recorded base

have reduction XXXX We we're $XXX cost actions and of implement to to European achieving savings reduce million XXXX, improve across savings are company-wide the million. cost programs costs of our cost our in businesses. to $XXX profitability begun million after our expecting The $XXX

XXXX. to Steve review financial in a more to I review in over to call the to our turning Before our minutes accomplishments detail, take want results few

from Our margin we and achieved integrated as and [indiscernible] of record further from acquisitions. synergies income million, XX% HIP operations $XXX of segment achieved the EBITDA a record

economic results the even pleased market. building evolution which are with in over of We with residential the very this years, produced the past challenges record the segment, back-to-back X

in our These leading record with cash-generative XXXX stability overall earnings model, results asset-light, an business North with to in positions provide America.

cash of billion $X on billion operations, generation plants of Westlake billion flow generate focus maintain investing over cash to after flow and equipment. and our $X.X constant Our $X.X from enabled cash improve free and to

$X.XX the commitment return business $XXX XXXX, including shareholders and quarterly to in generation, flow to strength million approximately our the our allowed company's rewarding of dividend per by increase future XX% The to us solid shareholders. our which demonstrates in confidence cash share, of to

investment-grade equivalents, they billion We $X.X pursue and flexibility finished the cash with rated balance present to highlighted opportunities solid sheet, a of year providing by as themselves.

intensity in X These sustainability part address and new engagement, approach an community October, environment and inclusion of Xth safety, are we existing stewardship to added in our additional publication towards annual COX with economy, target. report of goals the health X goals important our and water the feasibility communities. overall Finally, and conjunction circular reduction emissions usage, of diversity and our our

I'm our together, dedication to proud And of I'd XX,XXX like enabled these team given members and that nearly and record thank challenging environment. XXXX very their economic work accomplishments the our a global Taken for achievements HIP results. hard

to to on I results like of would more call detail financial to the quarter the for and turn fourth full over XXXX. Steve year now our provide

M. Bender

and good morning, Albert, you, Thank everyone.

in markets reflect a the epoxy by results a in As of of result fair Albert year. discussed, these change Netherlands financial XXXX $XXX assets past as impaired the resin we the of value the to in business global fourth reduced over our fully were million deterioration epoxy the quarter as rapid base

Asian throughout costs weak completed epoxy time additions persistently in economies we large markets into and Asian of as operations. XXXX, European and imports power, saw were at European raw of epoxy a capacity our remain flood European elevated Asian a material and energy

fully some we the settlement of reached resolved to the our portion resolve claims. our the insurance of that $XXX pleased of disputed settlements is previously with certain We reflect carriers. insurers liability with to subject quarter have work the while we amount these to we settlement dispute liability claims the We're amount. XXXX of disclosed, Separately, to million to total recognized of fourth portion resolve as in a charge

in a EBITDA, share the or income share noncash both million the all earnings of reminder, reported financial the my $XX quarter sales billion. charges. Westlake of litigation from As of net impairment per operations, $X.XX impact income on and the regarding and per comments income settlement exclude net fourth $X.X

quarter of and XXXX sales epoxy caustic fourth cost the average segment. restructuring PEM, we of resin decreased as result income quarter fourth XXXX particularly the operations prices from million and of $XX soda Net HIP our optimized as for in $XXX in margins a lower for and million of

net XXXX, the HIP a in quarter the compared in third million volume. average PEM, and to mix by PEM, sales $XXX in When seasonal changes due fourth to in sales prices typical income decreased decline quarter sales lower unfavorable of

of FIFO and not unfavorable only of million pretax method. been impact utilization would LIFO in compared For the the audited. on the fourth accounting an quarter been of to of earnings reported This an XXXX, estimate method have has our what $XX resulted is

lower we and year operations of $X.X reported EBITDA average of Compared net billion. income billion $XX.X to declined the growth prices XXXX, billion primarily attributable more to PEM income Westlake of $X.X due on our by $X.X of by income net offset results, sales billion from and as sales to HIP's For margins. lower full earnings, XXXX record in than

customer destocking and demand Turning global segment results. primarily prices entered result to a of below sales capacity when was billion global time our created to record for global in weaker the XXXX polyethylene of lower and a epoxy softer EBITDA and results, PEM additions XXXX conditions by economic margins as due $X.X resin new at our market.

XXXX saw many fourth product with a quarter our into improvement in X% in to after XXXX the year-over-year our improving which the However, rose volumes, close, of in have ended as first carried customer signals drew strength categories. quarter, we signs destocking that demand of sales from of PEM

the On a The quarter. price that in million soda, quarterly prices export million third from changes for average lower by sequential third $XXX increased EBITDA the the caustic of decline demand which basis, PEM's decreased driven was sales were quarter. of fourth by particularly result $XXX quarter from EBITDA and occurred

led demand increase caustic With slower to we that historic prices, into sequential by of X% pattern our drove an orders in the soda volume and increase sales in year-end. the lower sales a in contrast sales saw customer

have recently a quarter. our of prices most products within early While fourth sales in stable signs for the demand relatively XXXX, basis it's of major month-to-month after firming still we PEM seen on were

in $XXX to of revenue new materials operations margin costs, improvement lower pricing XXXX remain EBITDA brands in strong XX% set value to Moving allowed despite XX% our us of annual record to lower XXXX. contributing from HIP our to segment. a despite from income disciplined as the in in an million

strength the used as cost performance were diversification the our HIP solid These benefits due of PEM our results materials our lower products time to importance margins in strong segment sales and illustrates to our testament The a XXXX drove customers. are prices. when of our compressed by segment vertical and brand of to margins a the strategy lower at integration

more HIP sales prices. offset particularly to the customer average results, as with orders quarter rose that and drove XXXX. fittings than Volume our in the increase late lower the XX% sales markets and an strongest residential early in growth volumes continuing penetration for sales pipe focus year-over-year and in infrastructure in pipe into fourth Shifting strong was business, our quarter

our optimize XX% XX% million of the inclusive of XX%, HIP's footprint. $XX 'XX fourth declined the declines EBITDA year-over-year, manufacturing prices cost from the in this less the to is materials to our quarter cost, in of sales generally to average contributing pronounced While expansion than margin restructuring

by achievement Margin improvement and of supported $XX and volume in Dimex XXXX million over the Lasco of the growth year-over-year was synergies also sales the acquisitions. Boral, on cost XX% additional

the balance continued and our Turning cash on generation reflects operational cash discipline. flows. Westlake's sheet and to financial focus

For resulting in the billion, cash year was XXXX, expenditures capital strong $X.X billion. of free billion, while net $X $X.X full by of operating flow were provided activities cash

cash below of [ X rate $X sheet of stage position As billion, debt cash of business cash strong Westlake maturity XXXX, at of puts which the average and fixed cycle. $X.X balance rated financially XX, and is net were and of with turn X.X%, this billion, average in combined ] a XX total billion debt was remaining equivalents our EBITDA. Westlake's an December an attractive $X.X leverage and in at years, investment-grade with

opportunities. We our deploy will look value-creating sheet balance for to strategically

prices, to our Turning on $X.X billion questions for address to attention XXXX and your billion, current view Infrastructure guidance expect of be some revenue $X modeling between Products Based and and in around XXXX, EBITDA XX%. margin we some me of year our the and Housing our with demand let ahead. provide segment

$XXX targeting savings to are of even million cost cost exceeding we mentioned, target. last year's XXXX, XXXX in Albert after As $XXX $XXX our million savings of million

to second expect total cost to at our planned half begin approximately I that approximately scheduled in for $X year XX ethylene Petro the includes run turnaround projected We our capital is depreciation a rate. to the This be our expenditures days. billion, similar last to of unit

For XXXX, of XX%. the we rate tax full our expect effective to year be approximately

expense interest [ $XXX cash ]. expect approximately also million be We to

current Albert? turn over our provide of I'd like some Now to to to the business. call Albert outlook

Albert Chao

Thank you, Steve.

segments North evolving by head to into are executing segment, positioned and increased market strategies. market. our XXXX, HIP with we broad of supported has As positions our market while our our growing breadth the a respond trends strong we with In farthest to brands, of footprint well penetration product the the American portfolio, leading

of portion market growing should sales the to exposure growth. segment support volume Our this future HIP

leader which in segment our plans. advantaged Meanwhile, serve in specialty feedstock PEM also Westlake to our America energy PEM are customers' and support North our and market and and polyethylene of capabilities Furthermore, globally opportunities. flexibility their we scale needs growth provides chlorovinyls, with in export the our a provides segment, sales position

business of HIP our or integration our value in earnings and capture while growth and key cycle of strategy component potential. to segments more is strategy maximizing of reduce A strength the chain. the the to moves to cash earnings PEM of the our whether it demonstrates The value of the flow portion upstream downstream volatility

path customers same plans, portfolio, In products a achieving their we on with all will reliable our generating the continue At sheet. we long-term XXXX, continue balance provide expand top-tier sustainability returns rated including providing investment-grade safe, capital strong of a deliver to provide priorities time, value-added and innovative the operational business will to our to that returns our allocating maintaining shareholder goals. while to

strategy, Sustainability the to environment, growth also our it's profitable because because increasingly remains opportunities. thing do only critical for but market provides right to global not it the

to to this businesses our capture continue look further ways growth. integrate We to for market

paired utilizing example, compounds As and and global Dimex's process recent grinding, Dimex compounding compounding, blending PVC services. and their to global waste respective processing expertise in including businesses recycling shredding, have compounds a the materials, our Westlake

and the goals. opportunities our progresses, customers' further industrial continue sustainability reduce we XXXX and to look As materials to will material of waste of for technology businesses to to more our leverage portfolio know-how diverse our

a for current whole provided the record I our HIP and I when [indiscernible] call diversification of your our once in a as our Before at as in stage this results the on PEM trough want margins to the were strategy and year at time some thoughts XXXX outlook. stability prices cycle. earnings closing The sales questions, at to overall benefits and of fourth the a provide again quarter open were

remains our backdrop uncertain, key the for While outlook confident few a macroeconomic near-term in I'm reasons. more

destocking First, lower of following levels, customer inventories activity. at are period much prolonged a

improves. As will potential as markets believe our end a reflect begin upside the restock as our demand result, we to orders XXXX with demand customers in in better customers'

levels, the into our Second, rose our see we having quarter we normal part, and was momentum. in to PEM momentum the these we due volume volume HIP are support customers XXXX enter segment inventory seasonal decline XX% XXXX X% year-over-year low year-over-year, fourth Fourth rose year-end. our Meanwhile, exited quarter have sales and for solid typically we sales customer sales as and sequentially, dialogue with began with volume segment we XXXX. X% which towards the counter that to in

pricing in trade is support in levels have momentum solid tensions our the to most also sales imports East price Panama segment. and into the PEM disrupt routes from initiatives. supporting volume Canal disruptions products the for our XXXX, water Third, momentum lower of in global our the potential Recent and Middle continuing at

depress of series a paused has in confidence interest Reserve demand Federal XXXX. business rate the and Finally, hikes that

eventual those our policy backdrop interest businesses and could for pause While is interest potential the rates, as business is our favorable of to path for more more uncertain, portions autos. a such sensitive create macroeconomic cuts and the housing, of energy where XXXX, construction, in future particularly demand rate

very will Thank quarter over for to the I Jeff. fourth turn call earnings much call. listening back now our you to

Jeff Holy

Albert. you, Thank

remind our which after earnings ended. at to a the an listeners the our results, teleconference end like available information I'd call We'll presentation, questions, taking this call. and hours the begin provide on additional replay provides website X be clarity has we will of of into Before that available our is again

will take we questions. Jonathan, now

Operator

from the Citi. Our from first Instructions] line question of Patrick Cunningham [Operator comes

Patrick Cunningham

me hear now? you Can

Operator

Yes.

Patrick Cunningham

So hip might square cited just momentum around sales for and you to segment, trying rate guide uncertainty the I'm given some the what your just business. volume that margin in have outlook pretty on be, but solid we cuts,

PVC declines volumes So continued margin maybe price next from expect decline and year do you to stabilizing more grow is and costs?

M. Bender

Patrick, we stage of this first And good as So we've good enter question. portion the XXXX. a at seen momentum it's

on pull remarks, we continuing given few volume remain U.S. on But I whether [ Bureau Real by the starts indicated John to Burns first the or year the Census published Estate, Certainly, we or you're are some in demand see those pull would we've statistics and outlook as of this NHB months volume growth seen our the and of constructive XXXX. in think, recent of this depending we're to the at prepared 'XX ] the on remains, that housing stage. terms It's hard the outlook, by say at entire looking JBRE, at I good stage. permits optimistic, of project

Patrick Cunningham

was Got the I manufacturing it. optimization elaborate hoping then footprint That's on for helpful. HIP. you could And

So to coming of sort run to have that rate are closed you how close of should planning we many the HIP? specifically in assets $XXX savings expect from within maybe many what you and and million And that's million level XXXX? how contribution $XXX

M. Bender

of the in to million really assets the relates business. of the some fourth So products 'XX in took of 'XX restructuring optimizing building in quarter we that $XX our exterior

while so whether course market plan over that develops. will how our do 'XX, be somewhat or stone optimize business and applications, it in, of the certainly, other of function the look a we've be And exact steps to the further taken in we

demand our from both really Certainly, optimize marketplace, we're Southwest, positioned and footprint positioned Southeast able to that make the sure that demand. be and to those that meet assets we're if to along of market looking is. market well looking you based we're think that coasts -- where on to in that are And the smile

depending we're say, prepared So 'XX, that market I to to plans address we're have specific any ready for needs would conditions. those we on but don't announce

Albert Chao

add. those yes, -- to want On top of I

in in 'XX, as those of the done Some the rationalization . 'XX see savings, we result benefit cost we've a of

Operator

next question Frank And line Fermium from comes Research. our of Mitsch the

Frank Mitsch

I pretty the But want margins HIP quarter. appreciate reported come in I comments the cetera. your to record regarding back third do et question. to margin you volumes,

So that be big doesn't maybe doesn't as you're there's lower in an 'XX? expectation in -- margins bps 'XX thinking will to why playing that roughly a role continue. Is that, that XXX your than

M. Bender

Yes.

we're as end products. and certainly, points obviously, guidance Frank, of 'XX some see materials in of lower exiting, raw we those see some those with cost, So in PEM products. mentioned, discrete some the we price rising of And

we've why prices of seeing Simply, And and kind seeing at HIP so the of exit that cost rate materials the it's that potential, into to the potentially we're end of guided margins business. 'XX is the this in on in because lower some of traction business. and flow

Frank Mitsch

Got matter. sticking with forth. the raw But natural side, that And and so propane other moving seen inputs material Obviously, up. and ethane the a materials we've seen for collapse we've in and you. gas on

nat you gas? about do overall and NGLs movements How the the -- think recent perspective, in an from Westlake in

Albert Chao

Yes. that but our dropped it's cost of feet And million gas dollar gas say so has come ethylene not benefit. $XXX cubic manufacturing Every going well prices our ethane price when natural going of costs X,XXX energy price going down, down, to down, a is lot. over only down

Frank Mitsch

Great. Okay.

a So XQ, here correct? that's bit a of as in we sit tailwind

Albert Chao

Yes. Correct.

Operator

And from line next from Aleksey Capital. our Yefremov the of KeyBanc question comes

Unknown Analyst

Ryan is for on This Alex.

in little want bit in I question, to first my a So PEM. the on dig volumes

pricing there? market hinder then I think, sequentially. seen may across market-based rose, during far share any too? volumes here, the like purely XQ, industry were obviously, and competitors so from or recovery? have there Is of some your year-over-year . And in Or this X% So volumes gains kind aggressive that X% a you

Albert Chao

we as announcements a announcement price in price price several January [ well. price ] made, polyethylene are there upon further the got in business, and PEM we [indiscernible] increase PVC $X.XX polyethylene made Yes. in PC and announcements, in and

quarter warm a springtime So the first construction are the with so lot And know, is seeing weather, momentum as to with said, operating customers a momentum quarter. also, period. you of is activities we carrying we in are our orders going HIP the on. the fourth And as

Unknown Analyst

it be? your helpful. Great. That's about running what year, are anything just quantify you the for XQ, facilities when And to think about then you think chlor-alkali helpful. the here balance you can And going as you operating do think there of then rates be would in

Albert Chao

rates in Yes. U.S. the are people From rates some projecting XXXX of the in fourth from third are it's about the consultant And is operating in chlor-alkali study, high XX% down well, projecting -- chlor-alkali quarter, XXs. people XX%. quarter but that running

improvement. seeing we some So are

will of think I the about half to go chlorine PVC.

really drives the the running rates. for running PVC So rates chlor-alkali

Operator

] our question line And Sachs. from comes the next from of Fisher Duffy [ Goldman

Unknown Analyst

the think, the Or Chinese anything last is you question And be you around footprint maximum need going was to with is noncash stabilized? that Europe has do of just When do year to First imports from Europe? pressure just write-down into epoxy. your physical sufficient? in point

M. Bender

Duffy, the saw markets, of and build year, to is last saw that ramp imports to and put pressure. really -- the And So we impairment. that half European the we continue pressure as that's really the begin in on up what drove second really that

Albert Chao

partially are import rates that we start as also resin freight seeing epoxy European prices liquid a else because -- that the moving Suez of result, volume. And up. is and reducing And everything maybe is the Canal,

M. Bender

-- certain to European being we're Asia in proactive taking demand really become from and reducing taking cost itself out, market that -- from in remaining markets so you remarks, needs we actions that and we're weakness could epoxy balance see and in we're we the our given a our space. prepared perspective, cost manage understand in our to Duffy, focused marketplace still being competitive certainly that that while to competitive certainly that And the

Unknown Analyst

were meaningfully maybe that that domestic And of then how much from the export you was driven to And some just go back or Can out volume PEM volume? different by QX. that break tell products X%? at least than of the us to within X% if versus Great. number

M. Bender

exports. in a was move bigger some Yes, the of there

that's that And And and those and duties netbacks that some about shift. netbacks export and of are attractive, the but of because and such, PVC my those the of and so in caustic lower, And we shipping talked product comments, PVC into pickup certainly, of still saw in markets. moving product was the caustic we shift the volume some PEM. really is

Operator

line our Salvator of next Tiano [ comes America. the question Bank from ] from of And

Unknown Analyst

power I to has years to some gave I'm been impact much quantify back to see XXXX? what's lost help earnings pressure of also, the come your a can directionally trade earnings, reporting you or numbers with here? for wanted And at versus either are me versus in upward some in of you ago has your epoxy been are kind And [indiscernible] trying major you also, XXXX couple So price acquisition? a view if of least epoxy quantitatively and what epoxies seeing kind an of when How that Europe? that

M. Bender

earlier was I higher noted going Canal, because -- some that and certainly, of the spectrum Sea across cost. in East, comments, Albert comment, Red some the in of buoyancy trade of the Panama Middle seen would flows, to the hostilities certainly his the have because product the given I as pricing to we've

earlier, we've certainly, mentioned as pricing. in some I seen buoyancy And overall

States the stronger because in than So strength economies. the of they in certainly, here the markets Europe overall United are the in are

Unknown Analyst

guidance little of XX not the may Okay. the got know adjusted items on incurred million actually such EBITDA, the ask if QX. I HIP And in that you do restructuring XXXX. I bit in your some you a as for

baked charges have for XXXX? you any in margin EBITDA XX% restructuring wondering, the substantial I'm do

M. Bender

at Not stage. this

XX% through that guided flow is costs in margin would in restructuring of changes 'XX. I as and not so we've the range revenue to that to mentioned, $X.X of And any th reflective billion $X billion

lower As in of purely function in to prices, rising building such we some [indiscernible] I inputs with exited segment 'XX we're earlier PVC. mentioned of an seeing a our that prices the those products lower as question, is and

But we're given such that exit margins. an lower So PVC, we'll and some put on price plays seeing fact could costs input in pressure rising see points at how through. that the as that

Operator

comes And of Leithead from question the our from Barclays. line Mike next

Michael Leithead

Just can to? help this outlay clarify some charge on there charge point? related was in you at with this associated is litigation an what expected the And cash the quarter,

M. Bender

XX-Q an year. last disclosed first event related do X-K as was to quarter we've in and the in year. our earlier it be outlays the in this as I earlier of our Mike, Yes, Louisiana, expect to well this this half filings

Michael Leithead

just about want flattish the price Westlake where how the distribution within share talk then I And higher forward? going relatively the Can MLP Westlake for second, been some Great. Obviously, time, has you overall bit and Partners. fits of ask have the strategy a we briefly, to interest like. the here on now just rates

M. Bender

Sure, Mike.

So the strategy in was $XXX was that capital that than always raise Corporation, capital capital value proposition about that. here Westlake to a million done -- equity of raised greater we've of at and We've that manner.

seen and the prices has rise. do we've I interest we yield in see with challenged. decline yield. as have certainly, markets If to a year, materialize this we so space later would expect begin And that Reserve rates the MLP as lower higher to to the with the Federal yielded higher potentially cutting rates structure rates, certainly, have in been And a interest MLP

how certainly, this exist. Federal So year, but we'll later see that opportunity the does Reserve acts

Operator

Capital from of the line Arun next our RBC comes And Markets. question from Viswanathan

Arun Viswanathan

QX. move about I So just trying into you guess, to profitability, as think forward

million $XXX sequentially of so QX? into was decline are reverse would that you So to that or in in the any there QX, how reported XQ that when you at of attribute much QX to seasonality? move other look may And there EBITDA as discrete you items from

M. Bender

into across price the think traction in But And for going got prices the quarter nominated quarter. with out. additional the fourth PVC out announcements for about the chemical prices on end seen January, we've of the in price somewhat side has quarter $X.XX were nominations almost this in was polyethylene decline fourth effect you the into later the the that if of course in our that prices third caustic over for quarter. that the from with for we've Arun, settled -- are spectrum the out nominations business seen quarter. So first the we've of marketplace, some

you the when with we of So base, the ] you in exiting, the as volume could of which when constructive exiting with PEM see, see, is involved momentum increases pricing we've all and [ to those typical think in of you initiatives, seen on our side, see seasonal directions. entry because guidance levels the of counter the think customer behavior our and positive we terms the 'XX are

On seasonal in a building for you the guidance I would what as see certainly volumes, in side, saw we're HIP that and 'XX. also providing the decline products characterize typical we HIP,

forward look So we remain for constructive the XXXX. ended

Arun Viswanathan

to And you How -- other of increase then ethylene you? far or far quick you as in it as or as think where these levels. integration should still find set of as the maybe just be would kind question Okay. guess of And you opportunities whether maybe front on on your integration characterize have a you most side? front I debottlenecking Would chlor-alkali opportunities that levels? in

Albert Chao

it's good question. a Yes,

We more ways smart to be sometimes They debottleneck always a and improve bit debottleneck, have can debottleneck. than the in engineers. find the

growth. That a equipment in some So rationalization is what we're at have, the now, would a growth what benefit, cycle, region depending on of we X from looking that's it region that's the expand opportunities part later. the the moved time slower we're higher expand currently HIP, -- looking to at cost, happens and the it's also in to or of PEM cycle what have a whether good

side So to as HIP doing optimize the the in footprint all we are our well. stuff

Arun Viswanathan

that. And could on ask just if I follow-up similar a

caustic or could maybe more Just some do I in within you system peers, there's capacity rates, high-cost your know that utilization I own some think, two? kind in guess, chlor-alkali industry. rationalized chlorine But be just given the there's that the the supply-demand out been and next largest do for characterize as of how or the the year peer look you you from balance within rationalization

Albert Chao

position plans look actions. and cost of our question. we should take productivity necessary, Yes, that's and good at a the We where constantly

we benefits we from upstream as But from as one better, said, thing from upstream have benefit vice the is When when can running. downstream, to from integration better, take versa. heard and we to, Westlake discussions, you a is that really integration downstream take benefit our PVC HIP keep to still that, the we chlor-alkali part we And as the upstream the downstream's and our on businesses. those helps

we're by And just ours. a some other different itself. interactions able the unit of at from looking -- those by at whole So are totality, competitors not

Operator

UBS. line the And our from comes next Spector of Josh question from

Joshua Spector

I First, up to on wanted pricing. HIP follow

you into was in bit a 'XX, expected. what sequentially better exit quarter rate about when talk we pricing So the actually lower the than

see costs, December, mean of for you think reset lower? to next pricing you So when year? talk a get you percent that that in you was about can rising cetera, we window offset would where a there And that couple additional pass et a PVC,

M. Bender

sales about prices in HIP. I saw if think we at And certainly probably the year-over-year were of year-over-year XX% in -- in Josh, basically reduction about end think No, a you the year, prices certainly, prices, the change flat.

price of I'm about when And so average we're the thinking got where to comparing up the forward. position talk from really I not price for really about a price 'XX of end a the we locked pricing the the 'XX as have go exiting at we ourselves exiting perspective. average the price, in year Certainly,

in as be certainly, raise those in accordingly. a continue the strength we'll be see prices action function the prices. good to really in inputs seeing that do nominations we we're able over able If continued obviously, 'XX mentioned, in price to for to the picture, have opportunity, do, here of such seeing I stages we 'XX. given We see be increased to growth, course It'll PVC. we of we're demand volume the do the of demand as if early strength So take

Joshua Spector

I to And keep about that. you I more strength, then within some mean, volume alluding PEM. appreciate talked When just the you of exports.

versus can how that you your roughly And quarters? to share export a mix PVC So caustic the fourth of quarter? trend over where expect next normal couple and of you was

Albert Chao

Yes.

side, is more export -- PVC quarter. third quarter the in the fourth usually we demand than lower Our

come As exporting. result, I has But XX% sales average the the XX% is about exports ACC range that XX% a And that is the price industries down. been to January. I PVC think think PVC in reported

Operator

And line our next question the Matthew comes of from from Blair TPH.

Matthew Blair

up? you could little talk you of bit HIP this than you in deal, on a balance And M&A billion PEM? at about picking in what $X.X are more more a looking flow Albert, cash on the sheet, do market? opportunities you're Is focused deal seeing in if the

Albert Chao

announcements question. industry flows even though Yes. -- have more buying deals business. we've of HIP we banks, the on are assets That's ideas seeing seen picked in a some Yes, the deal companies up, really not good people or

return both the Westlake, look at synergies. what economic Westlake makes sides, for we'll our And through suddenly, for best

and constantly add at PEM we'll those in you economic it's deals us, whether So to at side, hard HIP we look deals. and side not just value look in or global take basis, on a the a when U.S.,

Matthew Blair

are with you match growth Does global -- consultants PVC around to be year, And that X% And stronger demand some this showing PVC PVC of X%. the global expectations? your capacity expect Sounds than this then growth up good. would year?

Albert Chao

Yes.

of about we ethylene from imported believe especially build. China, the is really carbide talk process there's ethylene-based think on is additions moratorium either with higher based plants starting I China, some on new lot in but EDC. great. a PVC the And People not produced the or capacity that cost

think I demand, global So the question. that's key

And related. political is the this macroeconomic of other related. some rate And one, interest

U.S. blessed So from and the cost the low-cost lowest ethane, position we far, make to power by are chlor-alkali. that low-cost has, ethylene

we we're they're enough. earlier, out the to our capture as for is or up in comes export, any If there, So export. to talk U.S. not that able mentioned opportunities able demand

in quarter, good capture quarter, more mentioned, the So why still third that's we export second we than we contributions. and did cash fourth and can

Operator

question the JPMorgan. Zekauskas And our from next comes of from line Jeff

Jeffrey Zekauskas

Did epoxy sequentially? profits decrease meaningfully

M. Bender

they you were profit to contributions, when it's Steve. continuing Jeff, over Yes. And XXXX. half second of of the the decline think Yes.

XQ they XQ, from to XQ. into and XQ from certainly declined, sequentially, declined So they

a was sequential the half there of over So the year. decline the of course second

Jeffrey Zekauskas

the of PEM earlier you sequential the your caustic in in lower as result then soda highlighted And prices. decline Okay. remarks,

they lower component, So in were the magnitude, order ton the if sequentially? a by was quarter $XXX that largest like of

Albert Chao

Yes. year. Every drop. I But well the or we think, last in I caustic dropped it are whole now, February price some and the combination as month, PVC think seeing -- think, over, as for I $XXX materially would except, of caustic think January year I dropped year, they last right, you're first increase. price

looking according up. February, price went price the a -- reported that that's not time $X first increase CMA at caustic I XX dropped, actually think has in for months, term to and

Jeffrey Zekauskas

other then in was business? parts was really and increase Infrastructure fittings that million $XX in the the and related quarter, year-over-year pipes related? Products it And Housing of HIP's Okay. the Or more fourth to

M. Bender

Yes.

both from the pipe and siding and, trim contribution our the and Jeff, frankly, in business that fittings So business period. were strong

and pipe business. both siding and fittings it's trim and So

Jeffrey Zekauskas

And material raw inflation then in talked raw PVC. material about any lastly, I cost there's inflation in you cost don't think HIPs.

XXXX? inflation raw cost in So HIPs from material coming for the where is

M. Bender

Yes.

PVC I'm by price that February are to the see Jeff, that So at producers nominations we speaking out all stage. the in this

all and the others Westlake nominations price out So have for February.

our products, price on in volume And should XXXX is given building the 'XX that our as the of the seeing products strength businesses, in the business, exited we're the resin. so And pull that seeing seen we've why PVC in demand which we we why products as the seeing and we all the building forward, by certainly, nominations and seen we're pull mentioned pull side this into those on we're marketplace. downstream producers look

Jeffrey Zekauskas

the up, transfer equal. is in at you're in that pushed be PEM will the -- that because so you're right? being down margins be market saying But and will all pushed what -- things PEM, margins Is HIPs margins from the you

M. Bender

Correct.

Operator

line [indiscernible] from And the Richard our question of comes Fargo. next Wells

Unknown Analyst

Great.

First, on HIP hip segment.

the landscape, in reflect about the market lines? you increase seeing competitive volume gains And XX% within where year-over-year pieces? are Does the growth. that wondering product any share Just the strongest

M. Bender

traction our base. really So we've seen with customer some good

the us make references the seen with many are associated and that brands portfolio. that to portfolio You've

a And we're homebuilders servicing nationwide market certainly strong to the is broad of with good many of product good contributions a so nationwide offering traction. allowed relationships and these building seeing in who distributors really and where footprint and having make share gains us many are really

Unknown Analyst

pricing the starts Okay. that a outlook weaker on are then seeing pricing just you macro competitive is landscape? and given more lower the side, And Or year-over-year? pressure, Great. housing pricing

M. Bender

really I saw the fourth would pricing this in to been flat maintain, HIP. able in the we've quarter relatively say, was quarter, to third you and relative

the pull, to were talked sequentially And of we that see we so questions, my be maintain that -- first of for in out beneficiary from certainly about that into as then quarter have good volume guidance, price to this we've I PVC XQ XQ. 'XX, volume of and we to and And the resin. say the able nominations other pull pricing some would a continuing in to trying couple do

see those to trim, get not through and try products, but certainly will prices, the in try plays so if market demand-related and other higher demand-wise through. those how we shutters And see certainly, higher prices applications, strength margin siding, we pass a PVC in not pass certainly we'll caught compression, to

Operator

next our of Vincent from Andrews And the question Stanley. line comes Morgan from

Turner Hinrichs

expecting remarks? wondering provide what Hinrichs update an I'm if on mentioned seeing Vincent. inventory Turner tailwinds your in on is from for restocking This where among you're levels customers? prepared for could you And you're

Albert Chao

Yes. Talking customers customers? HIP about PEM or

Turner Hinrichs

particular. the -- we're be but seeing in PEM mentioned, whichever channels of In interest particular, the restocking would

Albert Chao

Yes.

and come products. need down inventory came can to came order year, the -- last they when I down think you have low demand as and customers when levels -- prices be tell, order tend -- only

also, to carry year-end, need they over so don't And inventories.

to February of demand. starting customers come this we year, January, are their as into So order to

going are we up. so seeing And orders the

as keeping low customer But they cautious very true levels -- I from this know, stop to the -- people also people starting warmer medium that's earlier. And the is is inventory. think you in is March are material starting inventory the is but with season side. construction. good And the construction, increasing -- relatively HIP for still start usually And weather, it of still

item, house is think have if the they have they demand, I because are products So the X miss you -- meet the complete. to they make just not ordering sure good

the can site, items have they quickly. the to want all they to delivered put better that So he sure together a house they make

Turner Hinrichs

what perspective was or a I wondering in quarter during you also the saw in color your on little I'm increase also soda in supply you for dynamics wondering additional expecting XXXX? industry . and first caustic was and terms soda trade and volume, you're and caustic prices from -- provide underlying the prices whether and demand? or do whether outlook driven freight of the specifically your by price

Albert Chao

Yes.

improved. I supply-demand think has

the ordering the okay, they're caustic operating are but harder which pulp running and see plants forecast running paper and in XXs, some not chlorine. I the rates are and is for chlor-alkali U.S. mentioned high CMA's in think for I we great. earlier,

started it's up. export and prices the at increase consultants, and in think things $XX, May this now, And looking is change. could $X. April So February, forecast moving But their I again, it's also, CMA $X

it's Now, industry. announced of much the and price industry substantially And announcement announced. increase have higher increase a has in announced tell will our CMA that get place, how put the more increase but industry what announced will the pricing we time than other companies by price

Operator

next question McCarthy Kevin Partners. from Vertical our of Research the line comes And from

Kevin McCarthy

or if your might to in would internally each Those split buckets? be How was the into X you willing of sales. I you in regard percentage to versus those? XXXX, amount PVC it wondering sales would that export With used versus be production HIP U.S. size domestic you

M. Bender

and products we're mix a international, in of domestic of therefore, Because to is industry of to Steve. into XX% resin a that be our average. into XX% exports going sold Building industries, the the is the using or [indiscernible] are relative it's business is HIP Kevin, domestically, remaining X/X to much that PVC really of roughly business, relative Yes, that because Products the so lot going we either that of mix our business, selling lower

market to domestically going such domestic tend fourth to strong So obviously, And higher. how really focus a certainly, elements is. certainly as of domestic markets because pivot that But sale. to strong internal say versus on domestic to in we much -- the average when the than as market percentage be the that extent the is rather it those sell the always markets, And of that it's be also -- seasonal and lower export there's function can we would exports quarter, see as that industry we'd that export. I that domestically, we the plays

per of fast or percentage hard it's hard domestic se. you So export give to a and

Kevin McCarthy

caustic average just helpful. quarter you then the lower to XXXX relative same? prices the fourth Understood. And first back higher to or expect your That's or discussion. of roughly coming the the quarter to selling Would be soda in

M. Bender

versus the quarter price about first You average the were selling asking fourth quarter of for the in caustic XXXX?

Kevin McCarthy

Yes, than halfway that's done. more obviously correct. XQ is

weeks X the curious just for some if referenced of kind prices uptick you so, in look at of the February. books or So caustic in your you next

argue, move about the XQ, sequential do coming a XQ you in for think from could materially bit. that your I But into just off be different the of caustic? might one bottom think little perhaps terms we're So if price result realized

Albert Chao

to $X according said CMA, increase quarter caustic earlier, XXXX, And $XX ton year price $XX fourth at last the I Well, in by CMA February -- domestically looking ]. a [ and dropped April. in then

M. Bender

want with average in you price will to versus decline the Clearly, price 'XX. 'XX. I just price in the quarter average be fourth XQ. lower lower XQ through make in will So average were 'XX, the the price sure we've in XQ seen talking about than 'XX be

Operator

from from And Begleiter the our Deutsche next comes line David Bank. of question

David Begleiter

XXXX? do chain to ethylene margins progress Albert, through you how expect

Albert Chao

question. good That's a

achieved said are increase increase we there a in announced January, X for for price I and March. $X.XX As announced there the price [indiscernible] price are earlier, increase and February, price industry increase, participant have

price. in And seeing improvements export so are we some

on lot some depending be Red also global Sea, the Panama the but we So that macroeconomics issues. subside settled go Canal, Canal believe or part supply demand, through, a price increase economy, will Suez the when and in it will first quarter, of issue and

international moving trade. these So of all terms volumes play pricing our have in to come into and

exports producers or ] a As you large [ of XX% know, quantity, minus in exported. I to polyethylene, about USP close plus the total think U.S.

is big component of it. export So a

at least that forecast the low. the ethane-based So costs production be And in quarter, should better. domestically, be price all believe, earlier, mentioned it's lower natural we gas happen. of these things should with first what dynamics, would we difficult and ethane, But to

If price improve. increase, margin you have polyethylene should the

David Begleiter

from how And 'XX, just cost epoxy? in 'XX savings come your and it. Got in much will

Albert Chao

keeping and doing of business. whole was And system Proxy also, the we're and epoxy as exports Europe Pernis, is is that but plant we Netherlands issue make to are not epoxy a problems business. heard a Westlake's is you problem And we a a the Westlake's still small big cost big programs the with. reduction have talking -- part to Asian about substantial of part the -- better But prices low. of

M. Bender

over maybe probably broader just understanding be [ the that of and you or X/X give XX% on David, I would the PEM of probably of so to course to other business. that of guide the be the on the And the ] side business, HIP savings a side would of 'XX, probably

of that million mix relative $XXX you million that of an $XXX understanding to the benefit So savings expected we have from. to expect of of that

Operator

of next from Global Ahmed the Advisors. line Alembic Hassan our And comes question from

Hassan Ahmed

chlor-alkali the A question A markets. question around

and Over of decent North margin story of like. pick of of the years, the certainly of particularly operating right? market. to obviously, we the of up. And sort the in American the sort degree last relatively mean, end course then of couple a started And obviously, in XXXX, pricing chlor-alkali virtue in last discipline, since seeing couple sort the quarters, but had the I some rates of North pricing being America margin talked and over beginning the destocking erosion, depressed, growth, resulted that and of growth been about And all right? demand we high

competitors onwards. been larger vocal has your pretty of potentially out utilization one about ramping February rates Now, up there

operating pricing alluded you what some? holding and rates, being you in to on gives keeping is, to you to to maybe industry disciplined, my or them will confidence gaining XX%, even the question mind I that So remain you around continue particularly think

Albert Chao

was export U.S. question. price XXXX. high price. Yes. big I part think But start When export good then to the decline enjoyed And price. sharply, Very pretty export a high domestic was also prices

are domestic stabilize the export price little market U.S. respond. to has bit. so up that moving signs a seeing And we start And and

to international -- we So I some market. of earlier, business caustic it's sign and the or demands the improvement and economics increasing have see pulp said paper, alumina whether as we going think

they will improves, added a the a issue, as and not amount New goes only a in investment, the are the will kind globally all recover industrial, capacity economy -- of stimulate many, supply a it and and And it and grow rate, our lower construction China's caustic There's after is that. improves Year's again, many time segments industrial such over, global its continue -- interest hopefully, If have. trying is of economics demand really what help government will consumer, economy tell we broad used into it's issue. initiatives huge hearing globally. chemical, It's not also China that of to caustic economy, business stabilizes to,

it's bottom global last we things So and ] getting And year, this economy. [ the year, or hope out bellwether a will better. bottom out, of

So things lot we are optimally market, caustic -- cautiously optimistic on happen. but a could of

Hassan Ahmed

China Fair enough. I Obviously, stimulus earlier. like is for is market you that a in side no China. quite that on And touched assume as PVC. to second PVC that, of think a mean, follow-up there Chinese the on let's barring I'd things, the long

even are the of guys pricing side flows out China, terms barring could seeing ramps PVC on what potentially maybe So exports? particular? domestic U.S. if that you in stimulus, in trade a a of up China And be to risk

Albert Chao

Yes.

on carbide China's the go have not earlier, said to it's going or is South Asia maybe or you XX% I but based, PVC, as welcomed America. don't think carbide South Asia, North Europe PVC on I into maybe

and moratorium there's new a -- build. So on

But capacity, But South then will South improves, Chinese as as last infrastructure that's really, I to and the demand, in seen existing existing So Asia. Chinese PVC exports, demand residential China said, are emissions really it's watching the per are province carbon -- a and improve. Asia trying problem and government PVC and year, because Chinese carbon GDP reduce emissions carefully. -- by are the pollutions GDP control and are slowdown to from people big seeing double cities the really we we've

in market. don't higher expect a U.S. flooding is we so the PVC also, And And the then be still Energy cost Chinese high cost. still the

Hassan Ahmed

have in. one, if one I since Fair enough. could And squeeze last it I you,

X of with had margin sort shipping of role happened in about some sort PVC lower product to material of that in squeeze cost coincided I you escalation areas the the higher on Red QX back caustic. play on that talked that the sort in And did you the related particular? Just those QX, margins, of primarily guys a in saw obviously, demand of mean, Sea. and export that all

Albert Chao

we we ]. global [ since right. lot absolutely remarks, I about be price That increased Asia You're down shipping And trade. also the the to said arrival. talking ton that $XXX think supporting in The rates, our higher. increase by Europe has to that. of U.S., And a It's slowed $XXX to heard exports some it route up. really a or and even we're could impacted delayed stopped as also And helped going freight

Operator

of our next America. question question. for One Salvatore line And [ moment Tiano comes from Bank next ] our from the of

Unknown Analyst

you're pretty essentially, XX% EBITDA $X.XX that check, to about increase. the wanted much guidance, your saying margin, PVC HIP price on it's per Just contingent pound

that on So don't earnings? for of how go wondering, if overall much would that the expense much, or doesn't if I'm through increase price benefit HIP earnings year the as PEM

M. Bender

that prices that the provided at outlook indicated, we year. that of So see is Certainly, think products building raised don't that strength that we end our I if the reductions in in haven't I as we guidance of PVC price, today. the reflective seen

they that relatively flat. were saw You

business side. weighted the to continue we're contribution, the the to heavily constructive. So should of on Obviously, PVC really, side the HIP more be

we have costs, the having volume So is weighted obviously, using products heavily PVC. input we lower PVC more building that than while of in there benefit do in

constructive more be of the that to the PVC Westlake. for accrue would when you think -- it of whole get of price So nomination

Operator

hand like program. to the Jeff today's conclude back remarks. to for I'd program does question-and-answer This further the session any of

Jeff Holy

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

Operator

Thank Earnings Conference and Corporation Call. Fourth Westlake Full Year you for today's Quarter participating in

will call ended. call Goodbye. replay website. accessed after As Westlake's has replay this be The hours the reminder, be can via available a for beginning X

Westlake (WLK) 20 Feb 242023 Q4 Earnings call transcript