Westlake Corporation (WLK) Earnings

Management highlights

- Jean-Marc mentioned first quarter net sales $2.7B, EBITDA $235M. PEM sales improved in March due to Middle East conflict disrupting global supplies. HIP sales volume and EBITDA impacted by cold weather early but improved in March with homebuilding season start. 3-pillar profitability improvement plan delivered ~$150M EBITDA uplift. CFO transition announced with John Baksht joining and Steve Bender transitioning to special adviser. - Steve discussed financial results: sales $2.7B, net loss $100M. PEM EBITDA $36M, HIP EBITDA $186M. Mentioned footprint optimization actions, Epoxy business return to profitability, structural cost savings, but faced headwinds like PVC price declines, natural gas spikes, delayed homebuilding season. - Jean-Marc talked about Westlake's globally advantaged feedstock and energy position, constructive view on near-term trends for PEM and HIP, progress on profitability improvement plan, outlook for sales volume and pricing, and performance of acquired businesses.

Guidance

- Expect HIP segment 2026 revenue towards lower end of $4.4B - $4.6B range with EBITDA margin between 19% - 21% (excluding identified items). - Expected 2026 total capital expenditures $900M, cash interest expense ~$215M. - Outlook for company's 2026 earnings improved since last call, focused on delivering $600M EBITDA uplift from 3-pillar plan and disciplined capital allocation.

Segment performance

PEM: Net sales of $1.7 billion, EBITDA of $36 million, 3% sequential volume growth (excluding 2025 plant shutdowns impact). HIP: Net sales of $1 billion, EBITDA of $186 million, 10% sequential sales volume growth (excluding SCI acquisition impact). PEM was impacted by lower sales prices early in the quarter but saw improvement in March due to Middle East conflict disrupting global supplies. HIP was impacted by cold weather in first two months but improved in March with homebuilding season start.

Risks & headwinds

- Risks and uncertainties related to forward-looking statements discussed in Westlake's Form 10-K and other SEC filings. - Middle East conflict could persist, impacting global supply disruptions and feedstock/energy costs. - Slower-than-expected start to homebuilding season, transportation and raw material cost increases, especially for PVC resin, could impact HIP segment. - Uncertainty in housing market and its impact on HIP's building product sales volume.

Analyst Q&A

• Q: Unpack PEM results down sequentially, size headwind from PVC price margin declines, operating reliability, stranded costs from closures.

  A: Price resets at end of year impactful, elevated natural gas cost in Jan-Feb a headwind, seen improved reliability but not to desired level.

• Q: Underlying outlook for HIP business, expectations for pure price this year, if pricing baked into outlook.

  A: Announced price increases to offset PVC resin and transportation costs, but lag between price nominations and roll forward of costs.

• Q: On PEM segment transitory impacts, if transitory impacts equal $150M, base level of earnings for 2Q.

  A: $45M headwind from natural gas transitory, price increases in products to have benefits in 2Q, see significant benefits accruing in second quarter.

• Q: PVC outlook, operating rates, pricing expectations.

  A: Operating rates in mid-80s, expect elevated demand for PVC with construction season, see improvements across PEM segment.

• Q: HIP 2Q margin, order book, April performance.

  A: Order book good, lag between PVC pricing and realization may cause headwind in 2Q, full benefit expected in third quarter, fourth quarter typically slower.

• Q: Polyethylene pricing confidence, PVC export activity.

  A: Confident in achieving price increases, increasing PVC supply to export markets.

• Q: PEM operating rates in first and second quarter, working capital expectations.

  A: PEM operating at full rates, expect free cash flow in second quarter due to higher prices.

• Q: Cost savings sequentially, PVC pricing guidance.

  A: $150M year-over-year result, expecting price increases to be impactful in second quarter with specific PVC price increases achieved and expected.

• Q: U.S. export caustic and vinyls destinations, demand destruction.

  A: Reasonable demand for caustic, logistics impacted by Gulf conflict, demand stable.

• Q: Letter of intent to acquire German plant, PEM segment EBIT in March.

  A: Plant fits well potentially, PEM segment EBIT positive in March with improvements continuing in second quarter.

• Q: Q2 framing, cost reductions, PE and PVC uplift, HIP margin.

  A: Directionally correct in thinking, expect price realization in second quarter back half, cautious on housing volume.

• Q: PVC pipe settlement, litigation exposure.

  A: Settlement resolves direct purchasers component, reserve for other claimants.

• Q: HIP revenue and volume, cash left for cost-cutting.

  A: Mixed signals in housing market, ~$50M cash left for cost-cutting program.

• Q: PVC export opportunities, Chinese VAT removal.

  A: Seeing export opportunities, Chinese VAT removal creates headwind for exports.

• Q: Natural gas headwinds, FIFO impact split.

  A: $45M headwind from gas in first quarter, FIFO impact all PEM related.

• Q: Caustic soda outlook, weather impact on construction.

  A: Caustic soda demand stable, cold weather in first quarter slowed early order intake.

• Q: PVC price net of discounts, source of PVC price increase.

  A: Price resets at end of year, PVC price increase due to China's naphtha and carbide based capacity issues.

• Q: PEM idiosyncratic drag, caustic export to Europe.

  A: Planned maintenance at PEM site may be part of drag, no good export opportunities for caustic to Europe