WESTLAKE CORP Q3 FY2024 earnings call

Management Statement and Operational Highlights

• Global macroeconomic conditions: North America strong, Asia and Europe slow. PEM had $75M after-tax mothball expenses for European epoxy units, but plants are back in service with lessons learned applied to other facilities.
• HIP segment: Benefited from broad product portfolio and North American footprint despite weather disruptions. Focus on innovation with products like PIVOTAL recycled polyethylene and A-B-A pipe technology.
• Balance sheet: $2.9B cash and cash equivalents, looking to redeploy for value creation.

Segment Performance

• Housing and Infrastructure Products (HIP): Net sales of $1.1 billion, EBITDA of $262 million. Sales declined 8% sequentially due to weather events, with housing product sales down 7% and infrastructure product sales down 13%. EBITDA margin was 24%.
• Performance and Essential Materials (PEM): Net sales of $2 billion, EBITDA of $297 million. Sales volumes declined 1% sequentially, but average sales prices increased 1% due to higher caustic soda and polyethylene prices.

Guidance

• Full year 2024 HIP EBITDA margin guidance still at 22% with upside potential. HIP revenue expected $4.3B-$4.6B.
• Total cap ex still ~$1B. Company-wide cost savings target $125M-$150M, ~$120M achieved YTD.
• Effective tax rate now ~25% vs prior 23% due to mothball expense. Petro 1 ethylene cracker turnaround to begin end of Jan 2025, ~55 days.

Risks

• Macroeconomic uncertainties affecting demand. Impact of import duties on epoxy markets in U.S. and Europe. Weather-related disruptions affecting HIP sales volume. Dependence on key markets and potential for pricing pressures.

Q: On the AC and ECH units that have returned to service, are these plants back to running at full capacity?

A: Yes, they are up and no impact in Q4 from third quarter outages.

Q: How large is the Q3 sales pushed into Q4?

A: Hard to quantify, but sales will be achieved, timing depends on weather.

Q: What were the learnings from the outages in PEM?

A: Learned from design issues at LACC and power unit problems at Plaquemines, and will apply these to other plants.

Q: Thoughts on 2025 macroeconomic backdrop?

A: Optimistic due to accommodative monetary policy and stimulative actions, expecting acceleration of global economic recovery.