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): May 4, 2021
Westlake Chemical 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 May 4, 2021, Westlake Chemical Corporation (the "Company") issued a press release announcing its 2021 first 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 Chemical 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 May 4, 2021 to discuss its 2021 first 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 2021 first 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 onex991_20210331earningsrele.htmMayex991_20210331earningsrele.htm4, 2021.
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: | May 4, 2021 | By: | /S/ ALBERT CHAO |
| Albert Chao<br>President and Chief Executive Officer |
Document
EXHIBIT 99.1
WESTLAKE CHEMICAL CORPORATION
Contact—(713) 960-9111
Investors—Steve Bender
Media—L. Benjamin Ederington
Westlake Chemical Corporation Reports First Quarter 2021 Results
• 154% increase in first quarter 2021 operating income of $346 million vs first quarter 2020
HOUSTON--(BUSINESS WIRE)-- Westlake Chemical Corporation (NYSE: WLK) (the "Company" or "Westlake") today reported net income attributable to Westlake for the three months ended March 31, 2021 of $242 million, or $1.87 per diluted share, on net sales of $2,357 million. Net income in the first quarter of 2021 increased by $97 million from first quarter 2020 net income of $145 million, or $1.13 per share, on net sales of $1,932 million. Income from operations of $346 million for the first quarter of 2021 increased by $210 million from income from operations of $136 million for the first quarter of 2020. The increases in net income and income from operations were primarily driven by higher sales prices and integrated margins for most of our major products including polyethylene and PVC, as well as higher earnings resulting from strong demand in our downstream building products business. These increases in demand were driven by rebounding global economic activity in packaging consumption combined with the strength in the North American residential construction and the repair and remodeling markets. These increases were partially offset by lost sales and production volumes, increased maintenance expense and higher ethane and ethylene feedstock and natural gas fuel costs related to the severe winter storm. Compared to the prior-year period, net income was also impacted by higher income tax expense as the first quarter of 2020 included a tax benefit from the CARES Act of $62 million, or $0.48 per share.
First quarter 2021 net income of $242 million, or $1.87 per share, increased by $129 million from fourth quarter 2020 net income of $113 million, or $0.87 per share. Income from operations of $346 million for the first quarter of 2021 increased by $168 million from income from operations of $178 million for the fourth quarter of 2020. The increases in net income and income from operations versus the prior quarter were primarily due to continuing strength in demand for packaging products and construction activity which drove higher prices, integrated margins and volumes for most of our major products including polyethylene and PVC, in addition to strong earnings in our downstream building products business. These increases were partially offset by lower caustic soda prices as well as higher feedstock and fuel costs.
"Westlake had a strong start to 2021 as we experienced solid financial performance as we benefitted from the continuing global economic recovery and robust product demand paired with higher prices and margins for many of our products. The severe winter storm caused widespread industry disruption, including Westlake. Through the efforts of our employees, we quickly responded to the disruptions caused by the storm and fully resumed operations by the end of the quarter. We have worked tirelessly to address strong customer demand during the quarter," said Albert Chao, President and Chief Executive Officer. "As we look further into the year, we see continuing strong global demand in our PVC, polyethylene and downstream building products business driven by solid markets for the downstream uses of our products including residential construction, packaging and healthcare. We will remain focused on our strategy of safely and efficiently operating our facilities, while making disciplined investments, launching new and sustainable products, furthering our chain integration, lowering our costs and leveraging our current products and footprint around the world, while being a good steward of the environment in the communities in which we operate."
Net cash provided by operating activities was $265 million for the first quarter of 2021. As of March 31, 2021, cash and cash equivalents were $1,393 million and long-term debt was $3,547 million. Capital expenditures were $141 million for the first quarter of 2021.
EBITDA (earnings before interest expense, income taxes, depreciation and amortization) of $553 million for first quarter 2021 increased by $216 million compared to first quarter 2020 EBITDA of $337 million. First quarter 2021 EBITDA increased by $167 million compared to fourth quarter 2020 EBITDA of $386 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.
i
VINYLS SEGMENT
First quarter 2021 income from operations for the Vinyls segment of $200 million increased by $127 million from first quarter 2020 income from operations of $73 million. This increase in income from operations versus the prior-year period was primarily due to higher sales prices and integrated margins for PVC resin and higher earnings in our downstream building products business. The increase in operating income was partially offset by lower sales volumes and production and increased maintenance expense resulting from the severe winter storm, higher feedstock and fuel costs, as well as lower sales prices for caustic soda.
Vinyls income from operations for the first quarter of 2021 of $200 million increased by $34 million from fourth quarter 2020 income from operations of $166 million primarily due to strong sales prices for PVC resin, higher sales volumes for most of our major products and higher earnings in our downstream building products business, partially offset by higher feedstock and fuel costs as well as lower sales prices for caustic soda.
OLEFINS SEGMENT
First quarter 2021 income from operations for the Olefins segment of $180 million increased by $118 million from first quarter 2020 income from operations of $62 million. This increase in income from operations versus the prior-year period was primarily due to higher sales prices and integrated margins for all of our products, driven by continuing strong global demand, partially offset by lower sales volumes and lost production and increased maintenance expense resulting from the impact of the severe winter storm, as well as higher feedstock costs and fuel costs.
Olefins income from operations of $180 million in the first quarter of 2021 increased by $158 million from fourth quarter 2020 income from operations of $22 million. This increase in income from operations versus the prior quarter was primarily due to higher sales prices and integrated margins, driven by continuing strong global demand, as well as increased sales volumes for our products resulting from the hurricane impacts in late 2020, partially offset by higher feedstock and fuel costs.
The statements in this release and the related teleconference relating to matters that are not historical facts, including statements regarding continued improvement of our performance in 2021, demand for polyethylene, PVC and downstream business products, results of investments in initiatives and our focus on our strategy of safely and efficiently operating our facilities, while making disciplined investments, launching new and sustainable products, furthering our chain integration, lowering our costs and leveraging our current products and footprint around the world, and being a good steward of the environment in the communities in which we operate, 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 chemical 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; 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, 2020, which was filed with the SEC in February 2021.
ii
Use of Non-GAAP Financial Measures
This release makes reference to certain "non-GAAP" financial measures, such as EBITDA, 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, 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 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.
About Westlake:
Westlake is a global manufacturer and supplier of materials and innovative products that enhance life every day. Headquartered in Houston, we provide the building blocks for vital solutions — from packaging and healthcare products to automotive and consumer goods, to building and construction products. For more information, visit the company's web site at www.westlake.com.
Westlake Chemical Corporation Conference Call Information:
A conference call to discuss Westlake Chemical Corporation's first quarter 2021 results will be held Tuesday, May 4, 2021 at 11:00 AM Eastern Time (10:00 AM Central Time). To access the conference call, dial (855) 760-8160 or (704) 288-0624 for international callers, approximately 10 minutes prior to the scheduled start time and reference passcode 467 76 49.
A replay of the conference call will be available beginning two hours after its conclusion until 11:59 p.m. Eastern Time on May 11, 2021. To hear a replay, dial (855) 859-2056 or (404) 537-3406 for international callers. The replay passcode is 467 76 49.
The conference call will also be available via webcast at https://edge.media-server.com/mmc/p/fmi27wgt and the earnings release can be obtained via the Company's web page at: http://www.westlake.com/investor-relations.
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WESTLAKE CHEMICAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended March 31, | |||||
|---|---|---|---|---|---|
| 2021 | 2020 | ||||
| (In millions of dollars, except per share data) | |||||
| Net sales | $ | 2,357 | $ | 1,932 | |
| Cost of sales | 1,848 | 1,649 | |||
| Gross profit | 509 | 283 | |||
| Selling, general and administrative expenses | 136 | 120 | |||
| Amortization of intangibles | 27 | 27 | |||
| Income from operations | 346 | 136 | |||
| Interest expense | (33) | (31) | |||
| Other income, net | 12 | 11 | |||
| Income before income taxes | 325 | 116 | |||
| Provision for (benefit from) income taxes | 72 | (41) | |||
| Net income | 253 | 157 | |||
| Net income attributable to noncontrolling interests | 11 | 12 | |||
| Net income attributable to Westlake Chemical Corporation | $ | 242 | $ | 145 | |
| Earnings per common share attributable to Westlake Chemical Corporation: | |||||
| Basic | $ | 1.88 | $ | 1.13 | |
| Diluted | $ | 1.87 | $ | 1.13 |
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WESTLAKE CHEMICAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31,<br>2021 | December 31,<br>2020 | |||
|---|---|---|---|---|
| (In millions of dollars) | ||||
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | $ | 1,393 | $ | 1,313 |
| Accounts receivable, net | 1,327 | 1,214 | ||
| Inventories | 955 | 918 | ||
| Prepaid expenses and other current assets | 59 | 32 | ||
| Total current assets | 3,734 | 3,477 | ||
| Property, plant and equipment, net | 6,921 | 6,920 | ||
| Other assets, net | 3,395 | 3,438 | ||
| Total assets | $ | 14,050 | $ | 13,835 |
| LIABILITIES AND EQUITY | ||||
| Current liabilities (accounts payable and accrued and other liabilities) | $ | 1,326 | $ | 1,357 |
| Long-term debt, net | 3,547 | 3,566 | ||
| Other liabilities | 2,352 | 2,334 | ||
| Total liabilities | 7,225 | 7,257 | ||
| Total Westlake Chemical Corporation stockholders' equity | 6,261 | 6,043 | ||
| Noncontrolling interests | 564 | 535 | ||
| Total equity | 6,825 | 6,578 | ||
| Total liabilities and equity | $ | 14,050 | $ | 13,835 |
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WESTLAKE CHEMICAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Three Months Ended March 31, | ||||
|---|---|---|---|---|
| 2021 | 2020 | |||
| (In millions of dollars) | ||||
| Cash flows from operating activities | ||||
| Net income | $ | 253 | $ | 157 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||
| Depreciation and amortization | 195 | 190 | ||
| Deferred income taxes | 10 | 126 | ||
| Net loss on disposition and others | 15 | 9 | ||
| Other balance sheet changes | (208) | (421) | ||
| Net cash provided by operating activities | 265 | 61 | ||
| Cash flows from investing activities | ||||
| Additions to property, plant and equipment | (141) | (164) | ||
| Return of (additions to) investment from unconsolidated subsidiaries | (7) | 39 | ||
| Other, net | 13 | (7) | ||
| Net cash used for investing activities | (135) | (132) | ||
| Cash flows from financing activities | ||||
| Distributions to noncontrolling interests | (11) | (10) | ||
| Dividends paid | (35) | (34) | ||
| Proceeds from debt issuance | 4 | — | ||
| Net proceeds from (repayment of) short-term notes payable | — | (21) | ||
| Proceeds from drawdown of revolver | — | 1,000 | ||
| Repurchase of common stock for treasury | — | (54) | ||
| Other, net | 8 | 2 | ||
| Net cash provided by (used for) financing activities | (34) | 883 | ||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (3) | (3) | ||
| Net increase in cash, cash equivalents and restricted cash | 93 | 809 | ||
| Cash, cash equivalents and restricted cash at beginning of period | 1,337 | 750 | ||
| Cash, cash equivalents and restricted cash at end of period | $ | 1,430 | $ | 1,559 |
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WESTLAKE CHEMICAL CORPORATION
SEGMENT INFORMATION
(Unaudited)
| Three Months Ended March 31, | |||||
|---|---|---|---|---|---|
| 2021 | 2020 | ||||
| (In millions of dollars) | |||||
| Net external sales | |||||
| Vinyls | $ | 1,820 | $ | 1,505 | |
| Olefins | 537 | 427 | |||
| $ | 2,357 | $ | 1,932 | ||
| Income (loss) from operations | |||||
| Vinyls | $ | 200 | $ | 73 | |
| Olefins | 180 | 62 | |||
| Corporate and other | (34) | 1 | |||
| $ | 346 | $ | 136 | ||
| Depreciation and amortization | |||||
| Vinyls | $ | 157 | $ | 153 | |
| Olefins | 36 | 35 | |||
| Corporate and other | 2 | 2 | |||
| $ | 195 | $ | 190 | ||
| Other income, net | |||||
| Vinyls | $ | 10 | $ | 6 | |
| Olefins | — | 1 | |||
| Corporate and other | 2 | 4 | |||
| $ | 12 | $ | 11 |
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WESTLAKE CHEMICAL CORPORATION
RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND
NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
| Three Months Ended December 31, | Three Months Ended March 31, | ||||||
|---|---|---|---|---|---|---|---|
| 2020 | 2021 | 2020 | |||||
| (In millions of dollars) | |||||||
| Net cash provided by operating activities | $ | 431 | $ | 265 | $ | 61 | |
| Changes in operating assets and liabilities and other | (316) | (2) | 222 | ||||
| Deferred income taxes | 8 | (10) | (126) | ||||
| Net income | 123 | 253 | 157 | ||||
| Less: | |||||||
| Other income, net | 12 | 12 | 11 | ||||
| Interest expense | (34) | (33) | (31) | ||||
| Benefit from (provision for) income taxes | (33) | (72) | 41 | ||||
| Income from operations | 178 | 346 | 136 | ||||
| Add: | |||||||
| Depreciation and amortization | 196 | 195 | 190 | ||||
| Other income, net | 12 | 12 | 11 | ||||
| EBITDA | $ | 386 | $ | 553 | $ | 337 |
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WESTLAKE CHEMICAL CORPORATION
SUPPLEMENTAL INFORMATION
Product Sales Price and Volume Variance by Operating Segments
| First Quarter 2021 vs. First Quarter 2020 | First Quarter 2021 vs. Fourth Quarter 2020 | |||||||
|---|---|---|---|---|---|---|---|---|
| Average<br>Sales Price | Volume | Average<br>Sales Price | Volume | |||||
| Vinyls | +19.1 | % | +1.8 | % | +7.3 | % | +7.2 | % |
| Olefins | +35.2 | % | -9.4 | % | +27.7 | % | +15.3 | % |
| Company | +22.7 | % | -0.7 | % | +11.2 | % | +8.8 | % |
Average Quarterly Industry Prices (1)
| Quarter Ended | |||||
|---|---|---|---|---|---|
| March 31,<br>2020 | June 30,<br>2020 | September 30,<br>2020 | December 31,<br>2020 | March 31,<br>2021 | |
| Average domestic prices | |||||
| Natural gas ($/MMBtu) (2) | 2.0 | 1.8 | 2.0 | 2.7 | 2.8 |
| Ethane (cents/lb) (3) | 4.7 | 6.4 | 7.4 | 7.1 | 8.1 |
| Propane (cents/lb) (4) | 8.8 | 9.6 | 11.9 | 13.5 | 21.2 |
| Ethylene (cents/lb) (5) | 15.8 | 11.0 | 19.3 | 24.0 | 45.1 |
| Polyethylene (cents/lb) (6) | 52.3 | 49.0 | 61.0 | 67.7 | 78.0 |
| Styrene (cents/lb) (7) | 62.3 | 48.3 | 53.8 | 59.6 | 76.5 |
| Caustic soda ($/short ton) (8) | 648 | 698 | 697 | 653 | 648 |
| Chlorine ($/short ton) (9) | 176 | 175 | 176 | 193 | 234 |
| PVC (cents/lb) (10) | 71.8 | 66.5 | 73.3 | 84.5 | 92.8 |
| Average export prices | |||||
| Polyethylene (cents/lb) (11) | 39.4 | 38.5 | 45.7 | 53.2 | 76.3 |
| Caustic soda ($/short ton) (12) | 203 | 319 | 260 | 219 | 249 |
| PVC (cents/lb) (13) | 36.9 | 27.5 | 38.5 | 55.4 | 67.8 |
________________
(1)Industry pricing data was obtained through IHS Markit ("IHS"). We have not independently verified the data.
(2)Average Burner Tip contract prices of natural gas over the period.
(3)Average Mont Belvieu spot prices of purity ethane over the period.
(4)Average Mont Belvieu spot prices of non-TET propane over the period.
(5)Average North American spot prices of ethylene over the period.
(6)Average North American Net Transaction prices of polyethylene low density GP-Film grade over the period.
(7)Average North American contract prices of styrene over the period.
(8)Average USGC-CSLi index values for caustic soda over the period. As stated by IHS, "the caustic soda price listing represents the USGC-CSLi values. USGC-CSLi does not reflect contract price discounts, implementation lags, caps or other adjustments factors. Additionally, it is not intended to represent a simple arithmetic average of all market transactions occurring during the month. Rather, the USGC-CSLi is most representative of the month-to-month caustic soda price movement for contract volumes of liquid 50% caustic soda rather than the absolute value of contract prices at a particular point in time. It is intended to serve only as a benchmark."
(9)Average North American contract prices of chlorine over the period.
(10)Average North American contract prices of pipe grade polyvinyl chloride ("PVC") over the period. As stated by IHS, "the contract resin prices posted reflect an "index" or "market" for prices before discounts, rebates, incentives, etc."
(11)Average North American export price for low density polyethylene GP-Film grade over the period.
ix
(12)Average North American low spot export prices of caustic soda over the period.
(13)Average North American spot export prices of PVC over the period.
x
ex992investorpresentatio
First Quarter 2021 Earnings Presentation May 4, 2021
Westlake’s commitment to social responsibility and advancing sustainability is formed by the company’s longstanding core values: Health, Safety & Environmental - The vigilant stewardship of the environment and sustainability are of utmost importance and at the forefront of everything we do. Our People - Support, develop and inspire our people to achieve their personal best and treat them with dignity and respect. Quality & Continuous Improvement – An intensive practice of “never-ending process of improvement.” Competitiveness - Providing innovative and useful products, maintaining high standards of customer service and operational excellence with a constant focus on managing costs. Citizenship - Recognizing the importance of supporting the communities in which we work and live and make it a priority to take an active role in making these communities better. Westlake’s sustainability report can be found at https://www.westlake.com/sustainability Commitment to Social Responsibility and Advancing Sustainability Participating in Multi-Industry Associations for Environmental Protection Westlake is a proud partner with the following organizations to drive sustainable action to eliminate plastic waste, capture more flexible food packaging waste for recycling and support vinyls’ sustainable impact in the world, along with many other initiatives. Protecting the Environment Westlake has numerous programs designed to promote safe, ethical, environmentally and socially responsible practices including: a worldwide recycling program, operating in an energy efficient manner that stabilizes the power grids and reducing water usage and emissions. As discussed in our sustainability report, over a five year period, Westlake has reduced Sulphur Dioxide emissions to almost zero, reduced energy usage per ton of global production and achieved a nearly 30% reduction on CO2 emissions. 2
Westlake Chemical First Quarter 2021 Highlights 3 Business Highlights By quarter end, restored operations to all facilities after severe Winter Storm Uri, which had a significant impact on our business from reduced production and sales and additional maintenance expense Robust global demand and pricing environment continued for PVC, Polyethylene and downstream building products driving strong integrated margins from cross-section of industries including packaging, housing and automotive Generated $265 million cash flow provided by operating activities in the first quarter Business Hi lights Industry Outlook Continued strength in PVC and Polyethylene demand driven by globally strong demand in building products, packaging and automotive Recovering caustic soda demand driven by robust industrial, construction and automotive activity Focus on sustainability with Westlake launching green caustic soda, which has a reduced CO2 impact of more than 30% compared to conventional caustic soda Industry Outlook $242 MM $1.87 $1.4 B $553 MM
Westlake Chemical Corporation First Quarter 2021 Financial Highlights (1) Reconciliations of EBITDA, Vinyls EBITDA, Olefins EBITDA and Corporate EBITDA to the applicable GAAP measures can be found on pages 8, 9 and 10. First Quarter 2021 vs. Fourth Quarter 2020 + Higher sales prices and margins for polyethylene and PVC resin + Strong earnings in our downstream building products business – Lower caustic soda prices – Higher feedstock and fuel costs First Quarter 2021 vs. First Quarter 2020 + Higher sales prices and margins for polyethylene and PVC resin + Higher earnings in our downstream building products business – Lost production, lower sales and higher maintenance expense from winter storm – Lower caustic soda prices – Higher feedstock and fuel costs 4 ($ in millions) 1Q2021 4Q2020 1Q2021 vs. 4Q2020 1Q2020 1Q2021 vs. 1Q2020 Sales $2,357 $1,965 20% $1,932 22% Operating Income $346 $178 94% $136 154% Vinyls EBITDA $367 $334 10% $232 58% Olefins EBITDA $216 $59 266% $98 120% Corporate EBITDA ($30) ($7) - $7 - EBITDA¹ $553 $386 43% $337 64%
Vinyls Segment Performance 5 First Quarter 2021 vs. Fourth Quarter 2020 + Higher sales prices for PVC resin + Higher sales volumes for most of our major products + Strong earnings in our downstream building products business – Lower caustic soda prices – Higher feedstock costs First Quarter 2021 vs. First Quarter 2020 + Higher sales prices and margins for PVC resin + Higher earnings in building products business – Lost production, lower sales and higher maintenance expense from winter storm – Lower sales prices for caustic soda – Higher feedstock and fuel costs ($ in millions) 1Q2021 4Q2020 1Q2021 vs. 4Q2020 1Q2020 1Q2021 vs. 1Q2020 Sales $1,820 $1,590 14% $1,505 21% Operating Income $200 $166 20% $73 174% EBITDA $367 $334 10% $232 58% +7.3% +7.2% Vinyls Segment 1Q 2021 vs. 4Q 2020 +19.1% +1.8% Vinyls Segment 1Q 2021 vs. 1Q 2020
Olefins Segment Performance 6 First Quarter 2021 vs. Fourth Quarter 2020 + Higher sales prices and margins + Increased sales volumes First Quarter 2021 vs. First Quarter 2020 + Higher sales prices and margins – Lost production, lower sales and higher maintenance expense from winter storm – Higher feedstock costs and fuel costs ($ in millions) 1Q2021 4Q2020 1Q2021 vs. 4Q2020 1Q2020 1Q2021 vs. 1Q2020 Sales $537 $375 43% $427 26% Operating Income $180 $22 718% $62 190% EBITDA $216 $59 266% $98 120% +27.7% +15.3% Olefins Segment 1Q 2021 vs. 4Q 2020 +35.2% -9.4% Olefins Segment 1Q 2021 vs. 1Q 2020
Financial Reconciliations
Consolidated Statements of Operations 8 Three months ended December 31, Three months ended March 31, 2020 2021 2020 (In millions of dollars, except per share data) Net sales $ 1,965 $ 2,357 $ 1,932 Cost of sales 1,642 1,848 1,649 Gross profit 323 509 283 Selling, general and administrative expenses 117 136 120 Amortization of intangibles 28 27 27 Restructuring, transaction and integration-related costs - - - Income from operations 178 346 136 Interest expense (34) (33) (31) Other income, net 12 12 11 Income before income taxes 156 325 116 Provision for (benefit from) income taxes 33 72 (41) Net income 123 253 157 Net income attributable to noncontrolling interests 10 11 12 Net income attributable to Westlake Chemical Corporation $ 113 $ 242 $ 145 Earnings per common share attributable to Westlake Chemical Corporation: Basic $ 0.87 $ 1.88 $ 1.13 Diluted $ 0.87 $ 1.87 $ 1.13
Reconciliation of EBITDA to Net Income, Income from Operations and Net Cash Provided by Operating Activities 9 Three months ended December 31, Three months ended March 31, 2020 2021 2020 (In millions of dollars) Net cash provided by operating activities $ 431 $ 265 $ 61 Changes in operating assets and liabilities and other (316) (2) 222 Deferred income taxes 8 (10) (126) Net income 123 253 157 Less: Other income, net 12 12 11 Interest expense (34) (33) (31) Benefit from (provision for) income taxes (33) (72) 41 Income from operations 178 346 136 Add: Depreciation and amortization 196 195 190 Other income, net 12 12 11 EBITDA $ 386 $ 553 $ 337
Reconciliation of Vinyls, Olefins and Corporate EBITDA to Applicable Operating Income (Loss) 10 Three months ended December 31, Three months ended March 31, 2020 2021 2020 (In millions of dollars) Vinyls EBITDA $ 334 $ 367 $ 232 Less: Depreciation and Amortization 159 157 153 Other Income (Expenses) 9 10 6 Vinyls Operating Income (Loss) 166 200 73 Olefins EBITDA 59 216 98 Less: Depreciation and Amortization 35 36 35 Other Income (Expenses) 2 - 1 Olefins Operating Income (Loss) 22 180 62 Corporate EBITDA (7) (30) 7 Less: Depreciation and Amortization 2 2 2 Other Income (Expenses) 1 2 4 Corporate Operating Income (Loss) (10) (34) 1 Vinyls Operating Income (Loss) 166 200 73 Olefins Operating Income (Loss) 22 180 62 Corporate Operating Income (Loss) (10) (34) 1 Total Operating Income (Loss) $ 178 $ 346 $ 136
Quarterly Industry Pricing
1) Industry pricing data was obtained through IHS Markit ("IHS"). We have not independently verified the data. 2) Average Burner Tip contract prices of natural gas over the period. 3) Average Mont Belvieu spot prices of purity ethane over the period. 4) Average Mont Belvieu spot prices of non-TET propane over the period. 5) Average North American spot prices of ethylene over the period. 6) Average North American Net Transaction prices of polyethylene low density GP-Film grade over the period. 7) Average North American contract prices of styrene over the period. 8) Average USGC-CSLi index values for caustic soda over the period. As stated by IHS, "the caustic soda price listing represents the USGC-CSLi values. USGC-CSLi does not reflect contract price discounts, implementation lags, caps or other adjustments factors. Additionally, it is not intended to represent a simple arithmetic average of all market transactions occurring during the month. Rather, the USGC-CSLi is most representative of the month-to-month caustic soda price movement for contract volumes of liquid 50% caustic soda rather than the absolute value of contract prices at a particular point in time. It is intended to serve only as a benchmark." 9) Average North American contract prices of chlorine over the period. 10) Average North American contract prices of pipe grade polyvinyl chloride ("PVC") over the period. As stated by IHS, "the contract resin prices posted reflect an "index" or "market" for prices before discounts, rebates, incentives, etc." 11) Average North American export price for low density polyethylene GP-Film grade over the period. 12) Average North American low spot export prices of caustic soda over the period. 13) Average North American spot export prices of PVC over the period. Average Quarterly Industry Prices (1) 12 Quarter Ended March 31, 2020 June 30, 2020 September 30, 2020 December 31, 2020 March 31, 2021 Average domestic prices Natural gas ($/MMBtu) (2) 2.0 1.8 2.0 2.7 2.8 Ethane (cents/lb) (3) 4.7 6.4 7.4 7.1 8.1 Propane (cents/lb) (4) 8.8 9.6 11.9 13.5 21.2 Ethylene (cents/lb) (5) 15.8 11.0 19.3 24.0 45.1 Polyethylene (cents/lb) (6) 52.3 49.0 61.0 67.7 78.0 Styrene (cents/lb) (7) 62.3 48.3 53.8 59.6 76.5 Caustic soda ($/short ton) (8) 648 698 697 653 648 Chlorine ($/short ton) (9) 176 175 176 193 234 PVC (cents/lb) (10) 71.8 66.5 73.3 84.5 92.8 Average export prices Polyethylene (cents/lb) (11) 39.4 38.5 45.7 53.2 76.3 Caustic soda ($/short ton) (12) 203 319 260 219 249 PVC (cents/lb) (13) 36.9 27.5 38.5 55.4 67.8
Safe Harbor Language This presentation contains certain forward-looking statements including statements regarding PVC, polyethylene, building products and caustic soda pricing and demand, continued recovery in key end markets (such as housing starts), our cost control and efficiency efforts, our ability to capture integrated chain margin, results of reinvestment in our businesses and our reduction in carbon impact. Actual results may differ materially depending on factors such as general economic and business conditions; the cyclical nature of the chemical industry; the availability, cost and volatility of raw materials and energy; uncertainties associated with the United States, Europe and worldwide economies, including those due to political tensions in the Middle East and elsewhere; current and potential governmental regulatory actions in the United States and Europe and regulatory actions and political unrest in 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; technological developments; our ability to implement our business strategies; creditworthiness of our customers; uncertainties associated with the COVID-19 pandemic; 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 Chemical 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 13
