Westlake Corporation Reports First Quarter 2024 Results

Westlake Corporation announced first quarter 2024 results.

Record first quarter Housing and Infrastructure Products (HIP) income from operations of $210 million with a 20% operating income margin
HIP EBITDA of $264 million rose 29% year-over-year with a record first quarter EBITDA margin of 25%
PEM sales volume grew 3% sequentially from gradual demand recovery with stable average sales prices

SUMMARY FINANCIAL HIGHLIGHTS (in millions of dollars, except per share data and percentages)

	Three MonthsEnded March 31,2024		Three MonthsEnded December31, 2023			Three MonthsEnded March 31,2023
Westlake Corporation
Net sales	$	2,975	$	2,826		$	3,356
Income (loss) from operations	$	223	$	(552	)	$	536
Net income (loss) attributable to Westlake Corporation	$	174	$	(497	)	$	394
Diluted earnings (loss) per common share	$	1.34	$	(3.86	)	$	3.05
EBITDA	$	546	$	(235	)	$	825
Identified Items ⁽¹⁾	$	—	$	625		$	—
EBITDA excl. Identified Items	$	546	$	390		$	825
EBITDA margin ⁽²⁾		18%		14%			25%
Performance and Essential Materials ("PEM") Segment
Net sales	$	1,931	$	1,880		$	2,349
Income (loss) from operations	$	22	$	(664	)	$	403
EBITDA	$	253	$	(424	)	$	615
Identified Items ⁽¹⁾	$	—	$	625		$	—
EBITDA excl. Identified Items	$	253	$	201		$	615
EBITDA margin ⁽²⁾		13%		11%			26%
Housing and Infrastructure Products ("HIP") Segment
Net sales	$	1,044	$	946		$	1,007
Income from operations	$	210	$	121		$	143
EBITDA	$	264	$	173		$	205
EBITDA margin		25%		18%			20%
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(1)		"Identified Items" include a $475 million non-cash impairment charge and a $150 million charge to fully resolve certain liability claims
(2)		Excludes Identified Items

In the first quarter of 2024, Westlake achieved net sales of $3.0 billion, net income of $174 million and EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $546 million. The Company benefitted from continued strong demand in housing end markets, particularly for pipe & fittings and siding & trim, that drove record first quarter EBITDA in our HIP segment, while results in our PEM segment reflected continued weak global industrial and manufacturing activity.

Sales volume for Housing and Infrastructure Products in the first quarter increased 12% from the fourth quarter of 2023 while Performance and Essential Materials sales volume increased 3% quarter-over-quarter. Overall sales volume for the Company increased 6% sequentially from the previous quarter.

Housing and Infrastructure Products first quarter average sales price decreased 2% from the fourth quarter of 2023 while Performance and Essential Materials average sales price decreased less than 1% quarter-over-quarter. Overall average sales price for the Company decreased 1% sequentially from the previous quarter.

In the first quarter of 2024, HIP's EBITDA margin increased to 25% from 18% in the fourth quarter of 2023, while PEM's EBITDA margin increased to 13% from 11%, excluding Identified Items, over the same period of time.

"Our first quarter of 2024 results demonstrated the value of the diversity of the businesses in our portfolio as sales volume growth and margin expansion in our HIP segment supported our overall earnings at a time when pricing and margins in our PEM segment remain challenged by weak global demand. HIP sales volume grew a solid 12% sequentially as our leading positions in key channels enabled us to capitalize on resilient North American residential construction and infrastructure activity. The solid sales volume growth, combined with cost savings initiatives, enabled HIP EBITDA margin to expand to a first-quarter record of 25% from 18% in the fourth quarter of 2023," said Albert Chao, President and Chief Executive Officer.

"PEM segment sales volume improved 3% sequentially with most product categories growing due to favorable seasonality and modest improvement in end market demand. Average sales price, while relatively stable sequentially, remained depressed by continued weak global industrial and manufacturing activity and low-priced Asian imports," continued Mr. Chao.

"Looking ahead, we expect the growth in our HIP segment to continue despite elevated inflation and interest rates, as the supply of houses remains limited and the demographics supporting housing demand remain favorable. In our PEM segment, we expect relatively stable near-term performance as growth is constrained by continuing weak end market demand and low-priced Asian imports in some product categories and geographies. While we await an improvement in macroeconomic conditions, we are progressing with our efforts to improve the profitability of our European operations through structural cost improvement and we continue to make investments to improve the reliability and efficiency of our plants," concluded Mr. Chao.

Consolidated Results

(Unless otherwise noted the financial numbers below exclude the Identified Items)

For the three months ended March 31, 2024, the Company reported quarterly net income of $174 million, or $1.34 per share, on net sales of $3.0 billion. The year-over-year decrease in net income of $220 million was primarily due to lower average sales price and margins in our PEM segment, which were partially offset by lower material costs and higher margins in our HIP segment.

First quarter 2024 net income of $174 million increased by $81 million as compared to the fourth quarter of 2023. The sequential increase in net income compared to the prior quarter was primarily due to higher sales volume, driven by seasonal demand improvement and strong demand for both Housing Products and Infrastructure Products.

EBITDA of $546 million for the first quarter of 2024 decreased by $279 million compared to first quarter 2023 EBITDA of $825 million. First quarter 2024 EBITDA increased by $156 million compared to fourth quarter 2023 EBITDA of $390 million.

A reconciliation of EBITDA to net income, income from operations (including and excluding Identified Items) and net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Cash and Debt

Net cash provided by operating activities was $169 million for the first quarter of 2024 and capital expenditures were $272 million. As of March 31, 2024, cash and cash equivalents were $3.1 billion and total debt was $4.9 billion.

Performance and Essential Materials Segment

(Unless otherwise noted the financial numbers below exclude the Identified Items)

For the first quarter of 2024, Performance and Essential Materials income from operations was $22 million as compared to $403 million in the first quarter of 2023. This year-over-year decrease of $381 million was due to lower average sales price for most of the Company's major products, particularly caustic soda and epoxy resin. The lower average sales price in the first quarter of 2024 was partially offset by higher sales volume in the quarter.

Sequentially, Performance and Essential Materials income from operations increased by $61 million as compared to the fourth quarter of 2023. This increase in income from operations versus the prior quarter was primarily driven by higher sales volume, particularly for epoxy resin and PVC resin. Average sales price declined by less than 1% sequentially as increases in epoxy resin and olefins nearly offset decreases in chlorovinyls.

Housing and Infrastructure Products Segment

For the first quarter of 2024, Housing and Infrastructure Products income from operations of $210 million increased by $67 million as compared to the first quarter of 2023. The year-over-year increase was the result of higher sales volume, particularly for pipe and fittings, and lower material costs.

Sequentially, Housing and Infrastructure Products income from operations increased by $89 million as compared to the fourth quarter of 2023. This increase in income from operations versus the prior quarter was primarily due to higher sales volume and approximately $15 million lower plant closure costs associated with our footprint optimization program.