8-K
WESTLAKE CORP (WLK)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 3, 2023
Westlake Corporation
(Exact name of registrant as specified in its charter)
| Delaware | 001-32260 | 76-0346924 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission File Number) | (I.R.S. Employer<br>Identification No.) |
| 2801 Post Oak Boulevard, | Suite 600 | |
| --- | --- | --- |
| Houston, | Texas | 77056 |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (713) 960-9111
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.01 par value | WLK | The New York Stock Exchange |
| 1.625% Senior Notes due 2029 | WLK29 | The New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Item 2.02. Results of Operations and Financial Condition.
On August 3, 2023, Westlake Corporation (the "Company"), issued a press release announcing its 2023 second quarter results. A copy of the press release is furnished with this Current Report as Exhibit 99.1.
The information furnished pursuant to this Current Report, including Exhibit 99.1, shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed by Westlake Corporation under the Securities Act of 1933, as amended, unless specifically identified as being incorporated therein.
Item 7.01. Regulation FD Disclosure.
The Company is holding a conference call on August 3, 2023 to discuss its 2023 second quarter results. Information about the call can be found in the press release furnished with this Current Report as Exhibit 99.1. In addition, the Company made available an investor presentation regarding its 2023 second quarter results, which is furnished with this Current Report as Exhibit 99.2.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are furnished herewith:
99.1 Press release issued on August 3, 2023.
99.2 Investor Presentation.
104 The cover page from this Current Report on Form 8-K, formatted in Inline XBRL.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WESTLAKE CHEMICAL CORPORATION | |||
|---|---|---|---|
| Date: | August 3, 2023 | By: | /S/ ALBERT CHAO |
| Albert Chao<br>President and Chief Executive Officer |
Document
EXHIBIT 99.1
WESTLAKE CORPORATION
Contact—(713) 960-9111
Investors—Steve Bender
Media—L. Benjamin Ederington
Westlake Corporation Reports Second Quarter 2023 Results
•Housing and Infrastructure Products segment provided earnings stability
•Cash from operations of $555 million and free cash flow of $315 million
HOUSTON--(BUSINESS WIRE)--Westlake Corporation (NYSE: WLK) (the "Company" or "Westlake") today announced second quarter 2023 results.
SUMMARY FINANCIAL HIGHLIGHTS ($ in millions except per share data)
| Three Months Ended June 30, 2023 | Three Months Ended March 31, 2023 | Three Months Ended June 30, 2022 | ||||
|---|---|---|---|---|---|---|
| Westlake Corporation | ||||||
| Net sales | $ | 3,251 | $ | 3,356 | $ | 4,483 |
| Income from operations | $ | 396 | $ | 536 | $ | 1,175 |
| Operating income margin | 12% | 16% | 26% | |||
| Net income attributable to Westlake Corporation | $ | 297 | $ | 394 | $ | 858 |
| Diluted earnings per common share | $ | 2.31 | $ | 3.05 | $ | 6.60 |
| EBITDA | $ | 690 | $ | 825 | $ | 1,456 |
| EBITDA margin | 21% | 25% | 32% | |||
| Performance and Essential Materials ("PEM") Segment | ||||||
| Net sales | $ | 2,136 | $ | 2,349 | $ | 3,104 |
| Income from operations | $ | 215 | $ | 403 | $ | 965 |
| Operating income margin | 10% | 17% | 31% | |||
| EBITDA | $ | 435 | $ | 615 | $ | 1,162 |
| EBITDA margin | 20% | 26% | 37% | |||
| Housing and Infrastructure Products ("HIP") Segment | ||||||
| Net sales | $ | 1,115 | $ | 1,007 | $ | 1,379 |
| Income from operations | $ | 190 | $ | 143 | $ | 236 |
| Operating income margin | 17% | 14% | 17% | |||
| EBITDA | $ | 244 | $ | 205 | $ | 310 |
| EBITDA margin | 22% | 20% | 22% |
i
BUSINESS HIGHLIGHTS
In the second quarter of 2023, Westlake achieved quarterly net sales of $3.3 billion, quarterly net income of $297 million and quarterly EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $690 million. Compared to the first quarter of 2023, our HIP segment benefited from a seasonal increase in residential construction demand and lower raw material costs that more than offset lower average selling prices. Infrastructure Products and Housing Products contributed to the HIP segment sequential volume growth helping to improve segment results. Meanwhile, soft global manufacturing and industrial activity drove lower PEM sales volumes and average selling prices, particularly for caustic soda and epoxy. PEM operating income and EBITDA were also impacted by unplanned outages. Overall, the improvement in HIP results were insufficient to offset the declines in PEM performance, resulting in lower net sales, net income and EBITDA compared to the first quarter of 2023.
Performance and Essential Materials average sales prices decreased 6% while Housing and Infrastructure Products average sales prices decreased 2% from the first quarter of 2023. Overall sales prices for the Company decreased 4% sequentially from the previous quarter. When compared to the second quarter of 2022, PEM average selling prices decreased 21% while HIP average selling prices were down slightly resulting in a 15% overall sales price decline for the Company.
Sales volumes for Performance and Essential Materials decreased 4% while Housing and Infrastructure Products sales volumes increased 13% from the first quarter of 2023. Overall sales volumes for the Company increased 1% sequentially from the previous quarter. When compared to the second quarter of 2022, PEM sales volumes decreased 10% while HIP sales volumes decreased 18% resulting in a 13% overall sales volume decline for the Company.
In the second quarter of 2023, PEM's EBITDA margin decreased to 20% from 26% in the first quarter of 2023 while HIP's EBITDA margin increased to 22% from 20% over the same period of time. When compared to the second quarter of 2022, PEM's EBITDA margin decreased to 20% from 37% while HIP's EBITDA margin was unchanged at 22%.
EXECUTIVE COMMENTARY
"Our second quarter of 2023 results reflected the continuing weakness in global manufacturing and industrial activity that began in the second half of 2022. We did not see a seasonal increase in Performance and Essential Materials demand in the Spring, which led to a continuation of the soft macroeconomic backdrop into the second quarter that combined with unplanned outages which drove sequential and year-over-year declines in our PEM segment EBITDA. Results in our HIP segment, while lower than the all-time record second quarter of 2022, provided stability to our overall earnings with sales volumes, operating income and EBITDA all improving from the first quarter of 2023 levels. The sequential sales volume improvement was widespread across Infrastructure Products and Housing Products," said Albert Chao, President and Chief Executive Officer.
"Looking ahead to the remainder of 2023, in our PEM segment we will focus on improving controllable costs and commercializing innovation that addresses customer sustainability challenges so that we will be well-positioned as market conditions improve. Meanwhile, in our HIP segment we believe that our diverse suite of product offerings with varied price points position us well to help our customers address homebuyer affordability concerns through substitution of materials. Finally, we continue to seek opportunities to redeploy our robust free cash flow and solid balance sheet in ways that enhance shareholder value."
RESULTS
Consolidated Results
For the three months ended June 30, 2023, the Company reported quarterly net income of $297 million, or $2.31 per share, on net sales of $3,251 million. The year-over-year decrease in net income of $561 million from the second quarter of 2022 was primarily due to lower average sales prices and integrated margins in Performance Materials and lower operating rates and sales volumes across almost all product categories. These factors were only partially offset by higher Essential Materials average sales prices.
Second quarter 2023 net income of $297 million decreased by $97 million compared to the first quarter of 2023. The sequential decrease in net income compared to the prior quarter was primarily due to lower average sales prices and margins in our PEM segment, which was only partially offset by higher sales volumes in our HIP segment.
ii
EBITDA of $690 million for the second quarter of 2023 decreased by $766 million compared to second quarter 2022 EBITDA of $1,456 million. Second quarter 2023 EBITDA decreased by $135 million compared to first quarter 2023 EBITDA of $825 million. A reconciliation of EBITDA to net income, income from operations, 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 $555 million for the second quarter of 2023. As of June 30, 2023, cash and cash equivalents were $2,677 million and total debt was $4,894 million. Capital expenditures in the second quarter of 2023 were $240 million. For the second quarter of 2023, free cash flow (net cash provided by operating activities less capital expenditures) was $315 million, a decrease of $368 million as compared to the second quarter of 2022, primarily due to lower net income. A reconciliation of free cash flow to net cash flow provided by operating activities can be found in the financial schedules at the end of this press release.
Performance and Essential Materials Segment
Performance and Essential Materials income from operations for the second quarter of 2023 of $215 million decreased by $750 million from second quarter 2022 income from operations of $965 million. This decrease in income from operations versus the prior-year period was due to lower polyethylene and PVC resin average selling prices and integrated margins, as well as lower operating rates and sales volumes, particularly for epoxy, which were only partially offset by higher caustic soda average selling prices and lower feedstock and energy costs. As a result, PEM's segment operating margin declined from 31% in the second quarter of 2022 to 10% in the second quarter of 2023 and EBITDA margin decreased from 37% in the second quarter of 2022 to 20% in the second quarter of 2023.
Sequentially, Performance and Essential Materials income from operations decreased by $188 million as compared to the first quarter of 2023. The sequential decrease was largely due to unplanned outages, lower average selling prices for caustic soda and lower global operating rates and sales volumes for PVC resin and epoxy, which were only partially offset by increased sales volume of polyethylene and chlorine.
Housing and Infrastructure Products Segment
For the second quarter of 2023, Housing and Infrastructure Products income from operations of $190 million decreased by $46 million from second quarter 2022 income from operations of $236 million. This decrease in income from operations versus the prior-year period was the result of lower sales volumes, particularly in Infrastructure Products. Despite the 18% volume decline compared to the prior-year period, HIP's segment operating margin of 17% and EBITDA margin of 22% in the second quarter of 2023 were in line with the second quarter of 2022 as lower raw material costs and sales mix shift to repair & remodel offset unabsorbed fixed costs and lower average selling prices.
Sequentially, Housing and Infrastructure Products income from operations increased by $47 million as compared to the first quarter of 2023. This increase in income from operations versus the prior quarter was the result of seasonally higher sales volume, lower raw material costs and the strong value of our branded products.
iii
Forward-Looking Statements
The statements in this release and the related teleconference relating to matters that are not historical facts, including statements regarding our outlook for the performance of our business segments (such as product rates), macro demand conditions, our attempts to improve controllable costs, commercialize innovation and address customer sustainability challenges, our belief that our product offerings will allow customers to address homebuyer affordability concerns through substitution of materials, and our ability to deploy free cash flow and to enhance shareholder value are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to: the COVID-19 pandemic and the response thereto; general economic and business conditions; the cyclical nature of the industry; availability, cost and volatility of raw materials and utilities, including natural gas and natural gas liquids from shale production; the price of crude oil; uncertainties associated with the United States and worldwide economies, including those due to global economic and financial conditions; governmental regulatory actions, including environmental regulation and changes in trade policies; political unrest; industry production capacity and operating rates; the supply/demand balance for Westlake's products; competitive products and pricing pressures; access to capital markets; technological developments; the effect and results of litigation and settlements of litigation; operating interruptions; the ability to integrate recent acquisitions; the diversion of management time on transaction-related issues; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to Westlake's Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC in February 2023, and Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, which was filed with the SEC in May 2023.
Use of Non-GAAP Financial Measures
This release makes reference to certain "non-GAAP" financial measures, such as EBITDA and free cash flow, as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended. For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. We report our financial results in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"), but believe that certain non-GAAP financial measures, such as EBITDA and free cash flow, provide useful supplemental information to investors regarding the underlying business trends and performance of the Company's ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with U.S. GAAP. A reconciliation of (i) EBITDA to net income, income from operations and net cash provided by operating activities and (ii) free cash flow to net cash provided by operating activities can be found in the financial schedules at the end of this press release.
About Westlake
Westlake is a global manufacturer and supplier of materials and innovative products that enhance life every day. Headquartered in Houston, with operations in Asia, Europe and North America, we provide the building blocks for vital solutions — from housing and construction, to packaging and healthcare, to automotive and consumer. For more information, visit the company's web site at www.westlake.com.
Westlake Corporation Conference Call Information:
A conference call to discuss Westlake Corporation's second quarter 2023 results will be held Thursday, August 3, 2023 at 11:00 AM Eastern Time (10:00 AM Central Time). To access the conference call, it is necessary to pre-register at https://register.vevent.com/register/BI54f3177dd32545529addfd538d503bd8. Once registered, you will receive a phone number and unique PIN number.
A replay of the conference call will be available beginning two hours after its conclusion. The conference call and replay will be available via webcast at https://edge.media-server.com/mmc/p/qupkib59.
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WESTLAKE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||
| (In millions of dollars, except per share data and share amounts) | ||||||||
| Net sales | $ | 3,251 | $ | 4,483 | $ | 6,607 | $ | 8,539 |
| Cost of sales | 2,609 | 3,038 | 5,173 | 5,809 | ||||
| Gross profit | 642 | 1,445 | 1,434 | 2,730 | ||||
| Selling, general and administrative expenses | 213 | 220 | 435 | 420 | ||||
| Amortization of intangibles | 30 | 43 | 61 | 85 | ||||
| Restructuring, transaction and integration-related costs | 3 | 7 | 6 | 18 | ||||
| Income from operations | 396 | 1,175 | 932 | 2,207 | ||||
| Interest expense | (42) | (44) | (84) | (90) | ||||
| Other income, net | 23 | 17 | 45 | 28 | ||||
| Income before income taxes | 377 | 1,148 | 893 | 2,145 | ||||
| Provision for income taxes | 70 | 275 | 179 | 508 | ||||
| Net income | 307 | 873 | 714 | 1,637 | ||||
| Net income attributable to noncontrolling interests | 10 | 15 | 23 | 23 | ||||
| Net income attributable to Westlake Corporation | $ | 297 | $ | 858 | $ | 691 | $ | 1,614 |
| Earnings per common share attributable to Westlake Corporation: | ||||||||
| Basic | $ | 2.32 | $ | 6.65 | $ | 5.39 | $ | 12.52 |
| Diluted | $ | 2.31 | $ | 6.60 | $ | 5.35 | $ | 12.43 |
| Weighted average common shares outstanding: | ||||||||
| Basic | 127,649,341 | 128,341,132 | 127,599,093 | 128,206,988 | ||||
| Diluted | 128,484,016 | 129,341,096 | 128,471,760 | 129,134,246 |
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WESTLAKE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| June 30,<br>2023 | December 31,<br>2022 | |||
|---|---|---|---|---|
| (In millions of dollars) | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 2,677 | $ | 2,228 |
| Accounts receivable, net | 1,855 | 1,801 | ||
| Inventories | 1,671 | 1,866 | ||
| Prepaid expenses and other current assets | 93 | 78 | ||
| Total current assets | 6,296 | 5,973 | ||
| Property, plant and equipment, net | 8,550 | 8,525 | ||
| Other assets, net | 6,135 | 6,052 | ||
| Total assets | $ | 20,981 | $ | 20,550 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities (accounts payable and accrued and other liabilities) | $ | 2,131 | $ | 2,298 |
| Long-term debt, net | 4,894 | 4,879 | ||
| Other liabilities | 2,879 | 2,908 | ||
| Total liabilities | 9,904 | 10,085 | ||
| Total Westlake Corporation stockholders' equity | 10,544 | 9,931 | ||
| Noncontrolling interests | 533 | 534 | ||
| Total equity | 11,077 | 10,465 | ||
| Total liabilities and equity | $ | 20,981 | $ | 20,550 |
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WESTLAKE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended June 30, | ||||
|---|---|---|---|---|
| 2023 | 2022 | |||
| (In millions of dollars) | ||||
| Cash flows from operating activities | ||||
| Net income | $ | 714 | $ | 1,637 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 538 | 521 | ||
| Deferred income taxes | (51) | 81 | ||
| Net loss on disposition and others | 22 | 52 | ||
| Other balance sheet changes | (156) | (678) | ||
| Net cash provided by operating activities | 1,067 | 1,613 | ||
| Cash flows from investing activities | ||||
| Acquisition of business, net of cash acquired | — | (1,163) | ||
| Additions to investments in unconsolidated subsidiaries | (2) | (156) | ||
| Additions to property, plant and equipment | (507) | (493) | ||
| Other, net | 10 | 9 | ||
| Net cash used for investing activities | (499) | (1,803) | ||
| Cash flows from financing activities | ||||
| Distributions to noncontrolling interests | (24) | (24) | ||
| Dividends paid | (92) | (77) | ||
| Repayment of senior notes | — | (250) | ||
| Repurchase of common stock for treasury | (23) | (31) | ||
| Other, net | 8 | 5 | ||
| Net cash used for financing activities | (131) | (377) | ||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 9 | (30) | ||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 446 | (597) | ||
| Cash, cash equivalents and restricted cash at beginning of period | 2,246 | 1,941 | ||
| Cash, cash equivalents and restricted cash at end of period | $ | 2,692 | $ | 1,344 |
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WESTLAKE CORPORATION
SEGMENT INFORMATION
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|---|---|---|---|---|---|---|---|---|
| 2023 | 2022 | 2023 | 2022 | |||||
| (In millions of dollars) | ||||||||
| Net external sales | ||||||||
| Performance and Essential Materials | ||||||||
| Performance Materials | $ | 1,140 | $ | 2,060 | $ | 2,422 | $ | 3,989 |
| Essential Materials | 996 | 1,044 | 2,063 | 1,947 | ||||
| Total Performance and Essential Materials | 2,136 | 3,104 | 4,485 | 5,936 | ||||
| Housing and Infrastructure Products | ||||||||
| Housing Products | 918 | 1,116 | 1,736 | 2,088 | ||||
| Infrastructure Products | 197 | 263 | 386 | 515 | ||||
| Total Housing and Infrastructure Products | 1,115 | 1,379 | 2,122 | 2,603 | ||||
| $ | 3,251 | $ | 4,483 | $ | 6,607 | $ | 8,539 | |
| Income (loss) from operations | ||||||||
| Performance and Essential Materials | $ | 215 | $ | 965 | $ | 618 | $ | 1,844 |
| Housing and Infrastructure Products | 190 | 236 | 333 | 421 | ||||
| Corporate and other | (9) | (26) | (19) | (58) | ||||
| $ | 396 | $ | 1,175 | $ | 932 | $ | 2,207 | |
| Depreciation and amortization | ||||||||
| Performance and Essential Materials | $ | 217 | $ | 192 | $ | 427 | $ | 376 |
| Housing and Infrastructure Products | 51 | 70 | 106 | 141 | ||||
| Corporate and other | 3 | 2 | 5 | 4 | ||||
| $ | 271 | $ | 264 | $ | 538 | $ | 521 | |
| Other income, net | ||||||||
| Performance and Essential Materials | $ | 3 | $ | 5 | $ | 5 | $ | 13 |
| Housing and Infrastructure Products | 3 | 4 | 10 | 6 | ||||
| Corporate and other | 17 | 8 | 30 | 9 | ||||
| $ | 23 | $ | 17 | $ | 45 | $ | 28 |
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WESTLAKE CORPORATION
RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND
NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
| Three Months Ended March 31, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2023 | 2022 | 2023 | 2022 | ||||||
| (In millions of dollars, except percentages) | ||||||||||
| Net cash provided by operating activities | $ | 512 | $ | 555 | $ | 913 | $ | 1,067 | $ | 1,613 |
| Changes in operating assets and liabilities and other | (121) | (283) | (1) | (404) | 105 | |||||
| Deferred income taxes | 16 | 35 | (39) | 51 | (81) | |||||
| Net income | 407 | 307 | 873 | 714 | 1,637 | |||||
| Less: | ||||||||||
| Other income, net | 22 | 23 | 17 | 45 | 28 | |||||
| Interest expense | (42) | (42) | (44) | (84) | (90) | |||||
| Provision for income taxes | (109) | (70) | (275) | (179) | (508) | |||||
| Income from operations | 536 | 396 | 1,175 | 932 | 2,207 | |||||
| Add: | ||||||||||
| Depreciation and amortization | 267 | 271 | 264 | 538 | 521 | |||||
| Other income, net | 22 | 23 | 17 | 45 | 28 | |||||
| EBITDA | $ | 825 | $ | 690 | $ | 1,456 | $ | 1,515 | $ | 2,756 |
| Net external sales | $ | 3,356 | $ | 3,251 | $ | 4,483 | $ | 6,607 | $ | 8,539 |
| Operating Income Margin | 16% | 12% | 26% | 14% | 26% | |||||
| EBITDA Margin | 25% | 21% | 32% | 23% | 32% |
RECONCILIATION OF FREE CASH FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
| Three Months Ended March 31, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2023 | 2022 | 2023 | 2022 | ||||||
| (In millions of dollars) | ||||||||||
| Net cash provided by operating activities | $ | 512 | $ | 555 | $ | 913 | $ | 1,067 | $ | 1,613 |
| Less: | ||||||||||
| Additions to property, plant and equipment | (267) | (240) | $ | (230) | (507) | (493) | ||||
| Free Cash Flow | $ | 245 | $ | 315 | $ | 683 | $ | 560 | $ | 1,120 |
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WESTLAKE CORPORATION
RECONCILIATION OF SEGMENT EBITDA TO INCOME FROM OPERATIONS
(Unaudited)
| Three Months Ended March 31, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2023 | 2023 | 2022 | 2023 | 2022 | ||||||
| (In millions of dollars, except percentages) | ||||||||||
| Performance and Essential Materials Segment | ||||||||||
| Income from operations | $ | 403 | $ | 215 | $ | 965 | $ | 618 | $ | 1,844 |
| Add: | ||||||||||
| Depreciation and amortization | 210 | 217 | 192 | 427 | 376 | |||||
| Other income, net | 2 | 3 | 5 | 5 | 13 | |||||
| EBITDA | $ | 615 | $ | 435 | $ | 1,162 | $ | 1,050 | $ | 2,233 |
| Net external sales | $ | 2,349 | $ | 2,136 | $ | 3,104 | $ | 4,485 | $ | 5,936 |
| Operating Income Margin | 17% | 10% | 31% | 14% | 31% | |||||
| EBITDA Margin | 26% | 20% | 37% | 23% | 38% | |||||
| Three Months Ended March 31, | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2023 | 2023 | 2022 | 2023 | 2022 | ||||||
| (In millions of dollars, except percentages) | ||||||||||
| Housing and Infrastructure Products Segment | ||||||||||
| Income from operations | $ | 143 | $ | 190 | $ | 236 | $ | 333 | $ | 421 |
| Add: | ||||||||||
| Depreciation and amortization | 55 | 51 | 70 | 106 | 141 | |||||
| Other income, net | 7 | 3 | 4 | 10 | 6 | |||||
| EBITDA | $ | 205 | $ | 244 | $ | 310 | $ | 449 | $ | 568 |
| Net external sales | $ | 1,007 | $ | 1,115 | $ | 1,379 | $ | 2,122 | $ | 2,603 |
| Operating Income Margin | 14% | 17% | 17% | 16% | 16% | |||||
| EBITDA Margin | 20% | 22% | 22% | 21% | 22% |
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WESTLAKE CORPORATION
SUPPLEMENTAL INFORMATION
NET SALES PERCENTAGE CHANGE DUE TO AVERAGE SALES PRICE AND VOLUME
(Unaudited)
| Second Quarter 2023 vs. Second Quarter 2022 | Second Quarter 2023 vs. First Quarter 2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| Average<br>Sales Price | Volume | Average<br>Sales Price | Volume | |||||
| Performance and Essential Materials | -21 | % | -10 | % | -6 | % | -4 | % |
| Housing and Infrastructure Products | -1 | % | -18 | % | -2 | % | +13 | % |
| Company | -15 | % | -13 | % | -4 | % | +1 | % |
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ex992_20230630wlkearning
2Q 2023 Earnings Presentation
2 Westlake Second Quarter 2023 Highlights Net sales of $3.3 billion, net income of $297 million and EBITDA(1) of $690 million Elevated level of unplanned outages impacted operating income and EBITDA by ~$50 million Performance and Essential Materials second quarter sales of $2.1 billion with EBITDA(2) of $435 million Housing and Infrastructure Products second quarter sales of $1.1 billion with EBITDA(3) of $244 million Raising 2023 cost savings target to $75 - $105 million after achieving cost savings of $25 million in the second quarter and $50 million year to date Generated cash from operations of $555 million and free cash flow(4) of $315 million in the second quarter Strong balance sheet with $2.7 billion of cash and cash equivalents and $4.9 billion of gross debt locked in at interest rates averaging 3.2% with a weighted average maturity of more than 16 years 1) Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities can be found on page 12 2) Reconciliation of PEM EBITDA to the applicable GAAP measure can be found on page 13 3) Reconciliation of HIP EBITDA to the applicable GAAP measure can be found on page 13 4) Free cash flow is defined as Net Cash Provided by Operating Activities less Capital Expenditures
3 Westlake Corporation Performance Second Quarter 2023 1) Reconciliations of EBITDA, Performance and Essential Materials EBITDA, Housing and Infrastructure Products EBITDA and Corporate EBITDA to the applicable GAAP measures can be found on pages 12 and 13 – Soft economic conditions, in addition to unplanned outages, drove PEM sales volume down 4% QoQ with growth in polyethylene and chlorine more than offset by declines in PVC resin and caustic soda – Imports and weakness in global manufacturing and industrial activity drove sequentially lower PEM average selling prices and integrated margins, particularly for epoxy and caustic soda – Elevated level of unplanned outages impacted operating income and EBITDA by ~$50 million in the quarter + HIP sales volume grew 13% QoQ across our building products portfolio supported by seasonal trends + HIP segment EBITDA margin improved QoQ reflecting the value of our brands and relationships with customers + Achieved cost savings of ~$25 million in 2Q 2023 and ~$50 million in 1H 2023 ($ in millions) 2Q 2023 1Q 2023 2Q 2023 vs. 1Q 2023 2Q 2022 2Q 2023 vs. 2Q 2022 Sales $3,251 $3,356 (3%) $4,483 (27%) Operating Income $396 $536 (26%) $1,175 (66%) Performance and Essential Materials EBITDA $435 $615 (29%) $1,162 (63%) Housing and Infrastructure Products EBITDA $244 $205 19% $310 (21%) Corporate EBITDA $11 $5 - ($16) - EBITDA(1) $690 $825 (16%) $1,456 (53%)
4 Performance and Essential Materials (“PEM”) Segment Performance – Sales volumes fell QoQ due to continuing soft macroeconomic conditions and unplanned production outages, particularly in PVC resin and caustic soda – Average selling prices were lower QoQ primarily driven by declines in epoxy and caustic soda as demand weakness in Asian markets prompted competitively priced exports – Elevated level of unplanned production outages impacted operating income and EBITDA by ~$50 million + Feedstock and energy costs were lower on both a QoQ and YoY basis in the U.S. and Europe PEM Segment 2Q 2023 vs. 1Q 2023 Average Sales Price Volume -5.5% -3.6% PEM Segment 2Q 2023 vs. 2Q 2022 Average Sales Price Volume -20.9% -10.3% 1) Reconciliation of PEM EBITDA to the applicable GAAP measure can be found on page 13 2) PEM EBITDA margin is calculated by dividing PEM EBITDA by Total PEM Sales ($ in millions) 2Q 2023 1Q 2023 2Q 2023 vs. 1Q 2023 2Q 2022 2Q 2023 vs. 2Q 2022 Performance Materials Sales $1,140 $1,282 (11%) $2,060 (45%) Essential Materials Sales $996 $1,067 (7%) $1,044 (5%) Total PEM Sales $2,136 $2,349 (9%) $3,104 (31%) Operating Income $215 $403 (47%) $965 (78%) EBITDA(1) $435 $615 (29%) $1,162 (63%) EBITDA Margin(2) 20% 26% - 37% -
5 Feedstock and energy costs fell from the elevated 2022 levels, which supported integrated margins Softer industrial and manufacturing activity against a challenging macroeconomic backdrop drove sequentially lower sales volumes, particularly for PVC resin, epoxy and caustic soda Innovation and investment to capture secular growth in clean fresh water, electrification, renewable energy, and circularity applications continues Our North American feedstock cost advantage supported sequentially higher polyethylene sales volume and operating rates by creating export opportunities 1 2 3 4 Performance and Essential Materials Update
6 Housing and Infrastructure Products (“HIP”) Segment Performance 1) Reconciliation of HIP EBITDA to the applicable GAAP measure can be found on page 13 2) HIP EBITDA margin is calculated by dividing HIP EBITDA by Total HIP Sales + Seasonal increase in residential construction activity drove solid QoQ volume growth with widespread gains across most of our building products businesses + EBITDA margin improved QoQ due to fixed cost absorption on the higher sales volume – On a YoY basis, sales volume and EBITDA fell due to lower housing starts over the past year driven by higher mortgage rates HIP Segment 2Q 2023 vs. 1Q 2023 Average Sales Price Volume -1.7% +12.6% HIP Segment 2Q 2023 vs. 2Q 2022 Average Sales Price Volume -1.4% -17.7% ($ in millions) 2Q 2023 1Q 2023 2Q 2023 vs. 1Q 2023 2Q 2022 2Q 2023 vs. 2Q 2022 Housing Products Sales $918 $818 12% $1,116 (18%) Infrastructure Products Sales $197 $189 4% $263 (25%) Total HIP Sales $1,115 $1,007 11% $1,379 (19%) Operating Income $190 $143 33% $236 (19%) EBITDA(1) $244 $205 19% $310 (21%) EBITDA Margin(2) 22% 20% - 22% -
7 Our diverse portfolio of brands at multiple price points is well positioned to service homebuilders’ changing home designs as housing starts are impacted by higher mortgage rates Stabilizing building products demand with sequential sales volume improvement as homebuilders and homebuyers adjust to higher mortgage rates Recent all-time low inventory of existing homes for sale supports both new residential construction (~50% of HIP sales) and increased repair and remodel (R&R) activity (~50% of HIP sales) Longer-term fundamentals for housing strength remain intact due to decade- plus of under-building, increasingly favorable demographics, the aging housing stock and increasing popularity of remote work 1 2 3 4 Housing and Infrastructure Products Update
8 Westlake average 25%Westlake average 16% 0% 5% 10% 15% 20% 25% Return on Assets Return on Capital Employed EBITDA Margin Westlake Chemical Peers Building Peers Westlake average 10% Source: FactSet: Chemical peers includes: EMN, HUN, OLN, LYB, DOW Building products peer includes: JHX, FBHS, MAS, PGTI, DOOR, CNR, JELD Sales EBITDA Free Cash Flow Per Share 2013 2022 $3.8B $15.8B 2013 2022 $1.1B $4.2B 2013 2022 $1.10 $17.75 Ten Year Average of Returns and Margins (2013-2022) • Focused Bottom Line Growth • Asset Quality • Operating Rate Advantages • Chain Integration • Leading Market Positions • Specialty & Downstream Focus • Advantaged Feedstock Higher Sales, Margins and Returns Attributable to: ~15% CAGR ~14% CAGR ~32% CAGR Ten Year CAGR Performance 1) See page 14 for a reconciliation of EBITDA to Net Income and Cash Flow from Operating Activities 2) Free Cash Flow Per Share is defined as Net Cash Provided by Operating Activities less Capital Expenditures divided by Weighted Average Common Shares Outstanding (3) (1) (2) Westlake’s Historical Financial Performance 3) EBITDA Margin is EBITDA divided by Net External Sales
9 Established 20% carbon intensity reduction by 2030 target and goals for natural resource use, safety, community engagement and circularity Developed products with an improved environmental profile (e.g. GreenVin®, PIVOTAL™ and PVCO) Aligning disclosures with Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB) Significant ESG score improvement from two leading rating agencies over the past two years ESG Rating Agency Score Improvement CCC CCC BB BBB 2020 2021 2022 2023 Ratings for Westlake now reflect scores in the top 40% of chemical peers Chemical Peer Average WLK 0% 50%
10 Financial Reconciliations
11 Consolidated Statements of Operations Performance and Essential Materials Sales $ 2,136 $ 3,104 $ 2,349 $ 4,485 $ 5,936 Housing and Infrastructure Products Sales 1,115 1,379 1,007 2,122 2,603 Net sales 3,251 4,483 3,356 6,607 8,539 Cost of sales Gross profit Selling, general and administrative expenses Amortization of intangibles Restructuring, transaction and integration-related costs Income from operations Interest expense Other income, net Income before income taxes Provision for income taxes Net income Net income attributable to noncontrolling interests Net income attributable to Westlake Corporation $ 297 $ 858 $ 394 $ 691 $ 1,614 Earnings per common share attributable to Westlake Corporation: Basic $ 2.32 $ 6.65 $ 3.07 $ 5.39 $ 12.52 Diluted $ 2.31 $ 6.60 $ 3.05 $ 5.35 $ 12.43 Three months ended June 30, Six months ended June 30, Three months ended March 31, 642 1,445 1,434 2,730 2023 2,564 792 2,609 3,038 5,173 5,809 2023 213 220 435 420 30 43 61 85 31 222 3 7 6 18 396 1,175 932 2,207 (42) (44) (84) (90) 873 714 1,637 377 1,148 893 2,145 23 17 45 28 307 407 275 179 508 3 536 (42) 22 2022 2023 2022 (In millions of dollars, except per share data) 516 109 70 15 23 23 13 10
12 Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities Net cash provided by operating activities $ 555 $ 913 $ 512 $ 1,067 $ 1,613 Changes in operating assets and liabilities and other Deferred income taxes Net income Less: Other income, net Interest expense Provision for income taxes Income from operations Add: Depreciation and amortization Other income, net EBITDA $ 690 $ 1,456 $ 825 $ 1,515 $ 2,756 22 23 17 45 28 267 271 264 538 521 (109)(70) (275) (179) (508) 536 396 1,175 932 2,207 22 23 17 45 28 (42)(42) (44) (84) (90) 407307 873 714 1,637 (In millions of dollars) (81) (121)(283) (1) (404) 105 16 35 (39) 51 Three months ended June 30, Six months ended June 30, 20232023 2022 2023 2022 Three months ended March 31,
13 Reconciliation of PEM, HIP and Corporate EBITDA to Applicable Operating Income (Loss) Three months ended June 30, Three months ended March 31, Six months ended June 30, 2023 2022 2023 2023 2022 Performance and Essential Materials EBITDA $ 435 $ 1,162 $ 615 $ 1,050 $ 2,233 Less: Depreciation and Amortization 217 192 210 427 376 Other Income (Expenses) 3 5 2 5 13 Performance and Essential Materials Operating Income (Loss) 215 965 403 618 1,844 Housing and Infrastructure Products EBITDA 244 310 205 449 568 Less: Depreciation and Amortization 51 70 55 106 141 Other Income (Expenses) 3 4 7 10 6 Housing and Infrastructure Products Operating Income (Loss) 190 236 143 333 421 Corporate EBITDA 11 (16) 5 16 (45) Less: Depreciation and Amortization 3 2 2 5 4 Other Income (Expenses) 17 8 13 30 9 Corporate Operating Income (Loss) (9) (26) (10) (19) (58) Performance and Essential Materials Operating Income (Loss) 215 965 403 618 1,844 Housing and Infrastructure Products Operating Income (Loss) 190 236 143 333 421 Corporate Operating Income (Loss) (9) (26) (10) (19) (58) Total Operating Income (Loss) 396$ 1,175$ 536$ 932$ 2,207$ (In millions of dollars)
14 Non-GAAP Financial Measures This presentation includes the non-GAAP measure EBITDA. A reconciliation to net income and to cash flow from operating activities is included above. (In millions of dollars) Reconciliation of Westlake EBITDA to Net Income and to Cash Flow from Operating Activities LTM 2Q 2023 FY 2022 FY 2021 FY 2020 2023 Q2 2023 Q1 2022 Q4 2022 Q3 2022 Q2 2022 Q1 2021 Q4 2021 Q3 2021 Q2 EBITDA 2,938$ 4,179$ 3,693$ 1,246$ 690$ 825$ 619$ 804$ 1,456$ 1,300$ 1,131$ 1,077$ 932$ Less: Income Tax (Provision) Benefit (320) (649) (607) 42 (70) (109) (57) (84) (275) (233) (184) (193) (158) Interest Expense (171) (177) (176) (142) (42) (42) (43) (44) (44) (46) (46) (61) (36) Depreciation & Amortization (1,073) (1,056) (840) (773) (271) (267) (271) (264) (264) (257) (240) (203) (202) Non Controlling Interest (50) (50) (55) (43) (10) (13) (16) (11) (15) (8) (17) (13) (14) Net Income Attributable to Westlake Corp 1,324$ 2,247$ 2,015$ 330$ 297$ 394$ 232$ 401$ 858$ 756$ 644$ 607$ 522$ Non Controlling Interest 50 50 55 43 10 13 16 11 15 8 17 13 14 Changes in operating assets & liabilities 1,628 1,119 301 778 283 121 652 572 1 (106) 123 109 67 Deferred income taxes (153) (21) 23 146 (35) (16) (65) (37) 39 42 (27) 26 14 Cash flow from operating activities 2,849$ 3,395$ 2,394$ 1,297$ 555$ 512$ 835$ 947$ 913$ 700$ 757$ 755$ 617$ Performance & Essential Materials EBITDA 2,054 3,237 3,247 898 435 615 443 561 1,162 1,071 997 946 846 Housing & Infrastructure Products EBITDA 836 955 534 388 244 205 133 254 310 258 162 137 130 Corporate EBITDA 48 (13) (88) (40) 11 5 43 (11) (16) (29) (28) (6) (44) Westlake EBITDA 2,938$ 4,179$ 3,693$ 1,246$ 690$ 825$ 619$ 804$ 1,456$ 1,300$ 1,131$ 1,077$ 932$
15 Safe Harbor Language This presentation contains certain forward-looking statements including statements regarding creating value for our shareholders, pricing and demand for our products, industry outlook for both of our segments, our cost control and efficiency efforts, our ability to capture integrated chain margin, our development of additional products with sustainability attributes in the future, our sustainability goals and commitments and our reduction in carbon impact, our investment criteria to drive growth, our expectations regarding secular demand for products in our Performance and Essential Materials segment and our belief that we are well positioned to service homebuilders’ changing designs. Actual results may differ materially depending on factors, including, but not limited to, the following: the effects of our recently completed acquisitions, including our future financial condition, results of operations, strategy and plans; and expected synergies and other benefits from the acquisitions and our ability to realize such synergies and other benefits; general economic and business conditions; the cyclical nature of the chemical and building products industries; the availability, cost and volatility of raw materials and energy; uncertainties associated with the United States, European and worldwide economies, including those due to political tensions and unrest in the Middle East and elsewhere including the conflict between Russia and Ukraine; uncertainties associated with pandemic infectious diseases, particularly COVID-19; current and potential governmental regulatory actions in the United States and other countries; industry production capacity and operating rates; the supply/demand balance for our products; competitive products and pricing pressures; instability in the credit and financial markets; access to capital markets; terrorist acts; operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, labor difficulties, transportation interruptions, spills and releases and other environmental risks); changes in laws or regulations, including trade policies; technological developments; information systems failures and cyber attacks; foreign currency exchange risks; our ability to implement our business strategies; creditworthiness of our customers; and other factors described in our reports filed with the Securities and Exchange Commission. Many of these factors are beyond our ability to control or predict. Any of these factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements. Every forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. Investor Relations Contacts Westlake Corporation 2801 Post Oak Boulevard, Suite 600 Houston, Texas 77056 713-960-9111 Steve Bender Executive Vice President & Chief Financial Officer Jeff Holy Vice President & Treasurer
