Westlake Corp Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Patrick Cunningham - Citi - Analyst : Hi, good morning, Jean-Marc and Steve. I guess maybe I want to just start off on the HIP, specifically on price/cost, it seems like more margin degradation is implied. Can you first remind us the typical timeline for price realization there and your level of confidence in passing through inflation?

Question: Patrick Cunningham - Citi - Analyst : Understood, very helpful. And I know you discussed the direct impacts of this trade uncertainty being manageable. What do you anticipate retaliatory tariffs in China will do to PE operating rates and domestic prices?

Question: Jeffery Zekauskas - JPMorgan - Analyst : Thanks very much. Can you let us know how the PVC industry performed in the first quarter? Were volumes up or down or by how much? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 3:00PM, WLK.N - Q1 2025 Westlake Corp Earnings Call

Question: Jeffery Zekauskas - JPMorgan - Analyst : In your slides, in describing the PEM segment, you said that there were declines in chlor-alkali and PVC resin prices sequentially. I thought PVC resin prices went up in the first quarter. I thought there was a price increase in February and in March. Did you have a different experience or maybe posted prices were different than the -- (technical difficulty)

Question: Jeffery Zekauskas - JPMorgan - Analyst : And you talked about declines in chlor-alkali. Is that both in chlorine and caustic, or only in chlorine but not in caustic?

Question: Jeffery Zekauskas - JPMorgan - Analyst : Thank you very much.

Question: John Roberts - Mizuho - Analyst : Thank you. I think a driver for HIP was gaining share at distributors because of your ability to fill more of an order than competitors that have more narrow product lines. How's that going? And does this kind of environment make it harder to gain share because it's more competitive, or is it easier to gain some share here?

Question: Michael Leithead - Barclays - Analyst : Thanks, good morning, team. First, can you talk more about the mix shift impact that you're calling within HIP? What businesses are generating above average margin that maybe you're seeing a disproportional slow down here?

Question: Michael Leithead - Barclays - Analyst : Got it. That's helpful. And then second, is epoxy generating positive EBITDA today and do you need to take further actions to improve that business's profitability?

Question: Aleksey Yefremov - KeyBanc Capital Markets - Analyst : Good morning, everyone. You mentioned mix in your HIP sales in Q. Could you comment on what's happening in the pricing in specific categories, and I was wondering pipe and fittings were prices flat or up, and is there any difference between large and small diameter products?

Question: Aleksey Yefremov - KeyBanc Capital Markets - Analyst : Thanks, Steve, and staying with fit when you just mentioned that, overall, after discounts, it sounds like your PVC pricing was lower in Q1, just broadly petrochemical prices are lower, would any of that benefits HIP in the first half or this year in terms of margins?

Question: Aleksey Yefremov - KeyBanc Capital Markets - Analyst : Sorry, the question really is about lower PVC prices and lower petrochemical prices in general, at least at this moment. And will any of that benefit HIP margins?

Question: Aleksey Yefremov - KeyBanc Capital Markets - Analyst : Sorry, Steve, you broke up a little bit at least on my part. I'm not sure if it's an issue for the whole call, but the question was really about lower raw material costs for HIP.

Question: Josh Spector - UBS - Analyst : Hi, good morning. I wanted to ask specifically on PVC exports in PEM. Are you making any money on the exports of PVC at this point? I'm trying to understand kind of the negative EBIT and some of the shift down, and I guess depending on your answer there, do you need to flex any of your US operations just given some of your assets are net short ethylene and probably less advantaged? Are there opportunities for you to pull levers to improve that, or is my analysis wrong?

Question: Josh Spector - UBS - Analyst : Okay, I'll leave it there. Thank you.

Question: Michael Sison - Wells Fargo - Analyst : In terms of your outlook for 2Q, and I know you don't get into specifics, but directionally, should HIP EBITDA get better? And then if PEM could get better, why and what we need to drive that for an improvement in EBITDA for PEM in 2Q versus 1Q? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 3:00PM, WLK.N - Q1 2025 Westlake Corp Earnings Call

Question: Michael Sison - Wells Fargo - Analyst : Okay, and then in PEM sequentially?

Question: Michael Sison - Wells Fargo - Analyst : Right, and the headwind in feedstocks in PEM for Q1, does that improve materially in 2Q?

Question: Michael Sison - Wells Fargo - Analyst : Great. Thank you.

Question: Peter Osterland - Truist Securities - Analyst : Hey, good morning. Thanks for taking the questions. First, I wanted to ask how much of the $80 million of outage costs were planned versus unplanned in the first quarter, and could you size the expected costs associated with these outages in the second quarter?

Question: Peter Osterland - Truist Securities - Analyst : Understood, thank you. And then just as a follow-up, on your plans to reduce CapEx by 10% this year, if overall market conditions meaningfully worsen, how much could you or would you be willing to cut this year beyond that?

Question: Matthew Blair - Tudor, Pickering, Holt & Co. - Analyst : Great, thank you and good morning. Could you talk about the M&A pipeline, market weakness, shaking anything loose, or is M&A just not really a consideration right now? Thank you.

Question: Matthew Blair - Tudor, Pickering, Holt & Co. - Analyst : Sounds good. And then construction is weak across the board, but could you talk about any patterns and any differences you're seeing in residential versus commercial? Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 3:00PM, WLK.N - Q1 2025 Westlake Corp Earnings Call

Question: Matthew Blair - Tudor, Pickering, Holt & Co. - Analyst : Great thanks.

Question: Kevin McCarthy - Vertical Research Partners - Analyst : Yes, thank you and good morning. As you look across your portfolio, do you see any examples of businesses where you think volumes are being negatively affected by the international trade chaos in say April or May or is that not the case and the volume experience is on par with what you would normally expect seasonally?

Question: Kevin McCarthy - Vertical Research Partners - Analyst : Okay, and then secondly, if I may, Steve, polyethylene spot export prices seem to be ebbing a little bit in recent weeks. Can you update us on what your expectations are for resin selling prices, polyethylene resin that is in the next month or two here, including the contract market?

Question: Kevin McCarthy - Vertical Research Partners - Analyst : Thank you very much.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Great, thanks for taking my question. I hope you guys are well. I guess, first off, just on caustic, I guess there's been some stability, some strength, do you expect that to continue. And I guess, are you guys kind of operating maybe slightly below the market just given some of the maintenance or where would you kind of characterize industry in your own operating rates? Thanks.

Question: Arun Viswanathan - RBC Capital Markets - Analyst : Okay, thanks, Steve. And just curious on the impact of China and Chinese production on PVC. I mean, historically, we had their (inaudible)-based production, but you could still ship North American PVC over there. Understanding you guys didn't necessarily participate in a lot of that, do you see any changes, in say the midterm PVC outlook? Could it get more positive because of tariffs and maybe less imports or less Chinese exports entering different markets and maybe that would open up some extra export opportunities for you guys? Thanks.

Question: Frank Mitsch - Fermium Research, LLC - Analyst : Thank you. Good morning and long time no speak. I want to come back to the HIP margin question. I'm not sure if I'm understanding this correctly, so would appreciate elucidation here. I thought I heard you say that some of the higher margin pipes and fittings were sold in the fourth -- was pulled forward into the fourth quarter. So that would lead to a negative mix effect in the first quarter. And so yeah, so you posted 20.4% EBITDA margins. And so with that negative mix effect in 1Q, one would suspect that we'd probably get a lift in 2Q in terms of margins, so it would be some number above the 20.4%, and so it's part and parcel of that. The full year guide in terms of margins was guided towards the low end of 20% to 22%. So is there some sense of conservatism here? Am I misunderstanding? Should we not expect margins in HIP to be better in 2Q versus 1Q? Any help would be appreciated.

Question: Frank Mitsch - Fermium Research, LLC - Analyst : Excellent, thank you. And then lastly, last quarters we've seen some buybacks. Unfortunately, [Mr. Market] seems to be giving you, another opportunity here. How should we think about Westlake and buybacks and to and beyond?

Question: Turner Hinrichs - Morgan Stanley - Analyst : Hi, this is Turner on for Vincent. It would be great to make sure that we're level setting for the $100 million of energy and feedstock headwinds correctly. Was all of this just related to energy markets tightening, or were there some one-time headwinds related to the winter storms you mentioned that we should back out ahead of accounting for energy costs quarter over quarter in the second quarter?

Question: Turner Hinrichs - Morgan Stanley - Analyst : Okay, great. It'd be great to get some color on CapEx as well in light of the $100 million reduction of your full year guide. Can you quantify your maintenance CapEx and what was taken out with this reduction?

Question: Hassan Ahmed - Alembic Global Advisors - Analyst : We've obviously over the last several quarters been hearing about a fair degree of sort of capacity rationalization happening on the ethylene, polyethylene side of things. Could you comment a bit on what you guys are hearing globally on the PVC side? And part and parcel with that, what the global cost curves are looking like within PVC.

Question: Hassan Ahmed - Alembic Global Advisors - Analyst : Very helpful. And as a follow-up, continuing with sort of the overcapacity theme, obviously we're sort of swimming in oversupply on the epoxy side of things as well. But then there are some glimmers of hope around the whole sort of anti-dumping sort of duties potentially being imposed. So where do we stand on that and are you guys in the camp that as and when those anti-dumping duties do get imposed, you could see at the very least a return to positive EBITDA there?

Question: Hassan Ahmed - Alembic Global Advisors - Analyst : Very helpful. Thank you so much.