WLK

• Overall Q2 2026 Performance

  • Total company net sales hit $3.3 billion, with non-GAAP net income of $260 million ($2.01 per share), compared to a net loss of $12 million in Q2 2025. Non-GAAP total EBITDA was $679 million, a substantial improvement year-over-year and sequentially from Q1 2026.
  • Three core earnings drivers: PEM's advantaged North American feedstock position that expanded margins amid global oil price increases, the three-pillar profitability improvement plan contributing $150 million to year-over-year EBITDA growth, and HIP's 6% organic volume growth despite soft North American residential construction.

• Profitability Improvement Plan (Three Pillars)

  • Footprint optimization: Completed plant shutdowns (epoxy in Pernis, styrene in Lake Charles, three U.S. chloro-vinyl plants) in 2025, with cost savings tracking ahead of plan in 2026. The epoxy business turned from annual losses over $100 million to profitability in Q2 2026, and the North American chlorovinyl business has achieved significant logistical cost savings.
  • Company-wide cost savings: Tracking ahead of plan, supported by supplier partnerships and cross-company efficiency efforts.
  • Plant reliability: Improved substantially in H1 2026 compared to 2025, though residual unplanned outages remained in Q2. Most production issues were resolved by the end of Q2, and plants have operated well through July 2026. The full program remains on track to deliver $600 million total EBITDA benefit in 2026.

• Recent Acquisitions and Capital Deployment

  • Closed the acquisition of a PVC and VCM plant in Wilhelmshaven, Germany in June 2026. The site has advantageous deep-water port logistics that enable delivery of low-cost feedstock from Westlake's North American operations, creating integration benefits for the company's European supply chain.
  • Completed the ACI acquisition in January 2026; ACI's performance has met expectations, bringing differentiated technology and expanded market access that Westlake will leverage across its legacy compounds business.
  • Maintains a strong investment-grade balance sheet: as of June 30 2026, cash and investments totaled $1.9 billion, total debt was $5.1 billion, with a weighted average debt maturity of over 17 years and an average coupon of 4%. Retired $500 million of 2026 notes and repurchased $30 million of common stock in Q2.

• Operational Updates

  • PEM has 85% of its production capacity in North America, with production costs based on low-cost natural gas and NGLs that were largely immune to the Middle East conflict-driven global oil price spike. North American natural gas and ethane costs actually declined sequentially in Q2 due to warmer weather and increased associated gas production from U.S. oil drilling.
  • HIP achieved its second-highest quarterly revenue in segment history, with infrastructure (including data center projects) driving solid growth, and housing products outperforming the broader market due to strong brands, broad geographic reach, and preferred supplier status with large national home builders and distributors.

• For the HIP segment, 2026 revenue and EBITDA margin are expected to come in at the lower end of the previously communicated ranges: $4.4 billion to $4.6 billion in total revenue, with an EBITDA margin between 19% and 21% (excluding identified items). This downward revision reflects a more muted outlook for North American residential construction and higher transportation/raw material inflation.
• Total company 2026 capital expenditures are maintained at $900 million, approximately $100 million lower than 2025 and in line with annual depreciation.
• Full-year 2026 cash interest expense is still expected to be approximately $215 million.
• The full $600 million 2026 EBITDA benefit from the three-pillar profitability improvement plan is reaffirmed, with consistent incremental benefits expected through the second half of the year.
• For PEM in H2 2026, management expects steady demand matching the H1 trend, with price movements heavily tied to global oil prices. Margins will continue to be supported by the profitability plan, and the integration of the Wilhelmshaven acquisition is expected to position the site for meaningful earnings contribution starting in 2027.
• For HIP in H2 2026, no macro tailwind is expected for housing products, though the segment's strong competitive position will allow it to continue outperforming the market. Pipe and fittings demand remains favorable driven by the Infrastructure Investment and Jobs Act and data center construction, with healthy volume growth expected through the end of the year. A modest headwind to Q3 2026 HIP pipe sales is expected due to order timing pull-forward into Q2 2026, as customers secured supply following the outbreak of the Middle East conflict.

Westlake Corporation had two reporting segments for Q2 2026:

1. Housing and Infrastructure Products (HIP): Net sales were $1.3 billion, an 8% increase year-over-year, accounting for 39.4% of the company's total $3.3 billion net sales. Excluding the January 2026 ACI acquisition, organic sales volume grew 6% year-over-year, while average selling prices declined 3%. Sequentially, HIP net sales increased 26% from Q1 2026, driven by 24% higher sales volume and a 2% increase in average selling prices. EBITDA for HIP was $276 million, a $1 million increase year-over-year, with an EBITDA margin of 22% (down from 24% in Q2 2025, due to lower average prices and higher transportation/raw material inflation). Strong growth was led by pipe and fittings, supported by U.S. infrastructure spending and data center construction, as well as siding and trim for residential construction.
2. Performance and Essential Materials (PEM): EBITDA was $416 million, a $364 million increase year-over-year, accounting for 61.3% of total company EBITDA. The improvement was driven by the three-pillar profitability improvement plan and a 14% year-over-year increase in average selling prices led by polyethylene and PVC resin. Excluding plant closures, sales volume increased 7% year-over-year driven by caustic soda and PVC resin. Sequentially from Q1 2026, PEM EBITDA increased by $380 million, due to a 21% sequential increase in average selling prices and lower natural gas/ethane costs. Sales volume rose 2% sequentially, as higher caustic soda, chlorine, and epoxy resin volume offset lower polyethylene and PVC resin volume.

• Sustained high oil prices driven by the ongoing Middle East conflict could increase input costs for Westlake's competitors, but also create broader macroeconomic uncertainty that may negatively impact demand and put upward pressure on transportation costs.
• Higher mortgage rates and continued weakness in North American residential construction could suppress HIP housing product demand more than currently expected.
• A competitor has announced increased North American chlor-alkali operating capacity by 2027, which could put downward pressure on caustic soda pricing.
• Export demand for PVC and caustic soda remains subdued amid oversupply from Chinese producers, which could pressure pricing for Westlake's export volumes if conditions do not improve.
• While plant reliability has improved, unplanned outages could still occur in H2 2026, limiting production volume and earnings performance.
• Persistent raw material and transportation inflation could compress HIP margins further if the company is unable to fully pass through cost increases to customers.

Q: How much of the $150 million Q2 year-over-year benefit from the three-pillar program went to PEM versus HIP, and are these benefits sustainable? / A: The vast majority of the three-pillar benefit goes to the PEM segment, with only a small portion accruing to HIP. All savings are structural and sustainable, not one-time benefits. $300 million in total benefit has been realized in H1 2026 (including $150 million in Q2), and the full $600 million full-year target remains on track, with benefits continuing into 2027 and beyond. The savings are already visible in the company's consolidated cost of sales line, so no off-book adjustments are required to see the impact.

Q: How does a recent announced merger and expected capacity increase in the North American chloro-vinyl space change Westlake's strategy, and what risks does this create for caustic soda pricing? / A: Westlake already reduced its North American chloro-vinyl capacity in 2025, and the core strategy is to run all remaining assets at 100% utilization to maintain the lowest cost position, regardless of market conditions, the same approach the company already uses for its polyethylene business. This strategy positions Westlake to outperform even if competitors increase operating rates, as it prioritizes high utilization of low-cost assets rather than swinging output with market cycles.

Q: What is Westlake's current outlook for polyethylene pricing, inventories, and demand, following consultant projections of a 10-cent per pound July price decline? / A: Polyethylene prices were up 25% year-to-date through the end of Q2 2026. July contracts have not yet settled, but August price increases of 5 cents per pound have already been announced. Management expects polyethylene prices to be higher year-over-year by the end of 2026.

Q: What has driven HIP housing products' ability to outperform the weak new construction market, and is the expected Q2 demand pull-forward from Q3 materializing in July data? / A: HIP outperforms due to key competitive advantages: nationwide supply reliability, strong product warranties, affordable pricing, and the broad market preference for PVC siding in the U.S. This consistent outperformance has been sustained for multiple years even through flat market conditions. For the full second half, the new construction market is expected to be relatively flat with low single-digit growth in repair and remodel, though the outlook is softer than it was prior to the Middle East conflict and recent mortgage rate increases. The Q2 demand pull-forward from Q3 is expected to create only a modest impact, with overall H2 demand still remaining solid.