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F500-2021-388-Westlake Chemical

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Houston-based Westlake is a global manufacturer and supplier of petrochemicals, polymers, and fabricated building products.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Westlake is a global manufacturer of petrochemicals and products used in the housing and construction, packaging, and health care industries. It focuses on two main segments: performance and essential materials (PEM) and housing and infrastructure products (HIP). The PEM segment produces materials such as polyethylene, PVC, and epoxy resins, which are used in various industries including packaging, automotive, and construction. The HIP segment offers products like residential siding, trim, roofing, and PVC pipes, catering to housing and infrastructure markets.

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Westlake (WLK): Company Profile, Stock Price, News, Rankings

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Westlake

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Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation Fourth Quarter and Full Year twenty twenty four Earnings Conference Call. During the presentation, all participants will be in a listen only mode. After the speakers' remarks, you will be invited to participate in a question and answer session.

As a reminder, ladies and gentlemen, this conference is being recorded today, 02/24/2025. I would now like to turn the call over to today's host, John Zeller, Westlake's Vice President and Treasurer. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to the Westlake Corporation conference call to discuss our fourth quarter and full year results for 2024. I'm joined today by Albert Chao, our Executive Chairman Jean Marc Gilson, our President and CEO Steve Bender, our Executive Vice President and Chief Financial Officer and other members of our management team. During the call, we will refer to our two reporting segments, Housing and Infrastructure Products, which we refer to as HIP or Products and Performance and Essential Materials, which we refer to as PEM or Materials. Today's conference call will begin with Jean Marc, who will open with a few comments regarding Westlake's performance.

Steve will then discuss our financial and operating results. After which Jean Marc will add a few concluding comments and we will open up the call to questions. During the third quarter of twenty twenty four, we accrued $75,000,000 of expenses related to the decision to mothball two units within our European epoxy business. Additionally, during the fourth quarter of twenty twenty three, we recorded a non cash impairment charge of $475,000,000 related to the company's epoxy business, as well as a $150,000,000 charge to fully resolve certain liability claims. We refer to these three charges as the identified items in our earnings release and on this conference call.

References to income from operations, EBITDA, net income and earnings per share on this call exclude the financial impact of the identified items. As such, comments made on this call will be in regard to our underlying business results using non GAAP financial measures. A reconciliation of these non GAAP financial measures to GAAP financial measures is provided in our earnings release, which is available in the Investor Relations section of our website. Today, management is going to discuss certain topics that will contain forward looking information that is based on management's beliefs, as well as assumptions made by and information currently available to management. These forward looking statements suggest predictions or expectations and thus are subject to risks or uncertainties.

These risks and uncertainties are discussed in Westlake's SEC filings. We encourage you to learn more about these factors that could lead our actual results to differ by reviewing these SEC filings, which are also available on our Investor Relations website. This morning, Westlake issued a press release with details of our fourth quarter and full year results. This document is available in the press release section of our website at westlake.com. We have also included an earnings presentation, which can be found in the Investor Relations section on our website.

A replay of today's call will be available beginning today, two hours following the conclusion of this call. This replay may be accessed via Westlake's website. Please note that information reporting on this call speaks only as of today, 02/24/2025, and therefore, you are advised that time sensitive information may no longer be accurate as of the time of any replay. Finally, I would advise you that this conference call is being broadcast live through an Internet webcast system that can be accessed on our webpage at westlake.com. Now, I'd like to turn the call over to Jean Marc Gilson.

Thank you, John, and good morning, everyone. We appreciate you joining us to discuss our fourth quarter and full year '20 '20 '4 results. During the fourth quarter, each of our segments delivered year over year sales volume and EBITDA growth, while advancing several key initiatives to improve Westlake's future earnings potential, including continuing construction on our new PVCO pipe to satisfy strong customer demand in our hip segment. We have taken decisive action in reducing structural cost in our business, such as the mothballing of our ACH and ECH units in Pernice and other company wide cost saving initiatives, approximating US50 million dollars in the fourth quarter. This brings total cost savings for the year to $170,000,000 exceeding our target.

Overall, I'm pleased with the progress the team is making to position Westlake for continued earning growth well into the future. For the fourth quarter of twenty twenty four, we reported sales of 2,800,000,000 and EBITDA of $416,000,000 an increase of 7% compared to the fourth quarter of twenty twenty three EBITDA of $390,000,000 Sales volume increased year over year at each of our segments, highlighted by a strong 7% growth in hip, driven by continued solid demand for Pipe and Fittings and side and trim. Meanwhile, M sales volume growth of 1% was driven by export market demand and higher polyethylene production levels, with some polyethylene lines setting new production records during the quarter. While PEM grew sales volume year over year, average sales price was impacted by capacity increases across the industry. We also delivered on our proactive cost control measures across all of our business with EBITDA margin improving in each segment in the fourth quarter of twenty twenty four compared to the same period in 2023.

Regionally, North America was a bright spot for us during the fourth quarter as demand remained relatively strong in both segments. Our performance in North America was aided by our broad product portfolio in HIP, our strong and differentiated portfolio in PEM and our globally advantaged feedstock and energy position and high degree of vertical integration. Before turning the call over to Steve to review our financial results in more detail, I want to take a few minutes to review some of our key accomplishments in 2024. First, our Hip segment achieved record income from operations of $8.00 $7,000,000 and a record EBITDA margin of 24%, driven by strong 8% sales volume growth. HEIT has now set annual records for income from operation in each of the last five years, demonstrating the consistent solid growth characteristics of its underlying housing products and infrastructure product business.

EBITDA of $1,100,000,000 in 2024 and operating income of $8.00 $7,000,000 contributed 85% of our total segment's operating income in 2024. These record results provided stability to our overall earnings in 2024 with an asset light cash generative business model with leading market positions in North America. Second, we began construction on our new PVCO manufacturing plant in which it affords in Texas to support the continued strong customer adoption of this innovative product that improves the municipal pipe installation process with a reduced environmental footprint. Third, we returned approximately $325,000,000 to shareholders through dividends and share repurchases, which demonstrate our commitment to rewarding shareholders and our value based approach to share repurchases while we grow the company. Finally, we finished the year with a solid investment grade rated balance sheet highlighted by $2,900,000,000 of cash and cash equivalents providing flexibility to pursue growth opportunities.

Taken together, I'm very proud of our 2024 accomplishments and I would like to thank our nearly 16,000 team members for their hard work and dedication that enabled these achievements and the record hip results. I would now like to turn our call over to Steve to provide more detail on our financial results for the fourth quarter and full year of 2024. Steve?

Thank you, Jean Marc, and good morning, everyone. As a reminder, for comparison purposes, my comments regarding income from operations, EBITDA, net income and earnings per share all exclude the financial impact of the $75,000,000 mothball expense accrual that occurred in the third quarter of twenty twenty four as well as a noncash impairment charge of $475,000,000 related to the company's epoxy business and the $150,000,000 charge to fully resolve certain liability claims that occurred in the fourth quarter of twenty twenty three. Westlake reported net income of $7,000,000 or $0.06 per share in the fourth quarter on sales of $2,800,000,000 Net income for the fourth quarter of twenty twenty four included a one time non cash charge of approximately $45,000,000 or $0.35 per share for the revaluation of state deferred tax assets and deferred tax liabilities caused by recent legislative changes in Louisiana. We are in dialogue with the state to address solutions to mitigate the impact of this recent legislation. Fourth quarter EBITDA of $416,000,000 increased $26,000,000 from the fourth quarter of twenty twenty three as a result of higher sales volumes, particularly in HIP and our targeted cost savings actions.

For the fourth quarter of twenty twenty four, our utilization of the FIFO method of accounting resulted in an unfavorable pretax impact of $64,000,000 or 0.36 per share compared to what earnings would have been if we reported on the LIFO method. This is only an estimate and has not been audited. We delivered $50,000,000 of cost reductions in the fourth quarter, achieving $170,000,000 of total cost reductions in 2024, exceeding our target of $125,000,000 to $150,000,000 For the full year of 2024, we reported net income of $677,000,000 and EBITDA of $2,300,000,000 Compared to our 2023 results, 2024 sales of $12,100,000,000 declined 3%. The lower full year of 2024 sales were the result of solid 7% growth in sales volumes, particularly in pipe and fittings and core vinyls that was offset by a 10% decline in average sales price, particularly for core vinyls and epoxy resin. Turning to our segment results, hip sales in the fourth quarter rose year over year driven by a 7% increase in sales volume.

Volume growth was strongest in our pipe and fittings business in part due to orders from the third quarter being shipped in the fourth quarter as a result of the wet weather and hurricane impacts that we called out in our last earnings call. HiPS EBITDA margin of 19% in the fourth quarter of twenty twenty four improved from the prior year period as cost reduction efforts more than offset the impact of lower average sales price. HIP income from operations of $8.00 $7,000,000 was a new annual record in 2024. HIP's earnings growth in 2024 was driven by a strong eight percent sales volume growth with particular strength in pipe and fittings. The record EBITDA margin in 2024 of 24% was driven by higher sales volumes, better product sales mix and our cost reduction actions.

HIPAA's record earnings demonstrate this earnings capability of our business and also illustrate the benefits of our vertical integration strategy. As we begin 2025, hip sales volumes growth continues to look solid ahead of the start of the spring building season. Moving to our PEM segment, fourth quarter EBITDA of $220,000,000 increased by $19,000,000 from the fourth quarter of twenty twenty three. The year over year increase in EBITDA was the result of higher sales volumes, particularly for polyethylene driven by increased customer adoption or recent product innovations such as our Pivotal one pellet solution. Sales volumes grew 1% year over year driven by growth in export demand and increased production as a result of improved plant reliability.

PEM's fourth quarter EBITDA margin of 12% improved from 11% in the fourth quarter of twenty twenty three driven by our cost reduction efforts. EBITDA of $1,200,000,000 for full year 2024 was lower than 2023 results, primarily due to lower global sales prices and margins as a result of softer demand created by weaker global economic conditions and our two extended maintenance outages that occurred during the third quarter of twenty twenty four. Turning to the balance sheet and cash flows. As of 12/31/2024, cash and cash equivalents were $2,900,000,000 and total debt was $4,600,000,000 Our balance sheet continues to be well positioned with a fifteen year average debt maturity life. For the fourth quarter twenty twenty four, net cash provided by operating activities was $434,000,000 while capital expenditures were $285,000,000 resulting in free cash flow of $149,000,000 During 2024, we returned approximately $325,000,000 to shareholders.

And in the fourth quarter, we returned approximately $125,000,000 to shareholders in the form of dividends and share repurchases. We continue to look for opportunities to strategically deploy our balance sheet in order to continue to create long term value for our shareholders. Turning our attention to 2025, of your modeling questions and provide some guidance for the year ahead. Housing industry consultants forecast that housing starts for 2025 will be similar to 2024 at $1,300,000 The depth and breadth of our portfolio of building products and broad geographical reach across North America provides a platform for continued growth in our HIP segment in these market conditions. Thus, based on our current view of demand and prices, we expect revenue in our Housing and Infrastructure Products segment to be between 4,400,000,000 and $4,600,000,000 with an EBITDA margin of 20% to 22%.

We expect our total CapEx expenditures for the company to be approximately $1,000,000,000 similar to our depreciation run rate. This includes cost for a planned turnaround at our Petro one ethylene unit, which began at the January and is projected to last approximately sixty days. For the full year of 2025, we expect our effective tax rate to be approximately 23%. We also expect cash interest expense to be approximately 160,000,000 Now let me turn the call back over to Jean Marc to provide a current outlook for our business. Jean Marc?

Thank you, Steve. Sustainability and environmental stewardship remain critical to our mission at Westlake. I want to take a moment to recognize some of our key accomplishments in 2024 to advance our sustainability efforts. Example include, Westleaf being recognized by the Polymers for Europe Alliance as the winner of the Decarbonization category of the 2024 Polymer Producer Awards for its efforts to reduce CO2 emissions also beginning a pilot program with a leading U. S.

Hospital chain to source post consumer recycled PVC material and also investing in Universal Matter, which has pioneered and patented a technology that transforms carbon waste streams into high quality graphene for use in industrial products. These are just a few examples of ways that Westlake is working to increase the sustainability of our products and improve the environment. Before we open the call for questions, I want to provide some closing thoughts on 2024 and our current outlook for 2025. '20 '20 '4 was another record year for our Hip segment, which did an amazing job growing sales and earnings. Our demonstrated strength in our brand offerings of building products and broad geographical position across North America, serving our customers with an innovative product pipeline are reasons that support our constructive outlook for this segment in 2025.

This provides overall stability to Westlake earnings and cash flows while exemplifying our disciplined capital deployment track record. Turning to PEM segment, we see continued demand growth in our end markets such as packaging, coatings, light weighing materials and construction. Our differentiated product portfolio combined with our globally advantaged feedstock and energy position and a high level of vertical integration provides us a strategic advantage to deliver value to our end market customers and remain globally competitive. While we recognize the global macroeconomic backdrop as some uncertainties overhanging demand growth in 2025, we are focusing on actions that are within our control and which improve our businesses. We have taken proactive steps to reduce our cost structure and right size our European epoxy asset footprint and reinforce our long term competitiveness throughout the cycle.

We expect to deliver $125,000,000 to $150,000,000 in cost reductions in 2025 and will maintain a disciplined and balanced approach to the allocation of capital. We will continue to optimize our business to drive operational performance and reduce our costs. Finally, as 2025 unfolds, we will look for new opportunities to redeploy our solid investment grade balance sheet where our net debt is less than one time our trailing EBITDA. We continue to view our solid balance sheet with its ample borrowing capacity as a strategic advantage with industry leading financial flexibility to opportunistically pursue growth options. Our focus in 2025 will be upon being disciplined stewards of shareholder capital as you have come to expect of us.

Thank you very much for listening to our fourth quarter earnings call. I will now turn the call back over to John.

Thank you, Jean Marc. Before we begin taking questions, I would like to remind listeners that our earnings presentation, which provides additional clarity into our results, is available on our website and a replay of this teleconference will be available two hours after the call has ended. We will provide that information again at the end of the call. Towanda, we will now take questions.

Thank Our first question comes from the line of John McNulty with BMO Capital Markets. Your line is open.

Yes, good morning. Thanks for taking my question. So I guess the first one would just be on the hit margins. It looks like you're looking for a little bit of margin degradation as we look to 2025. I guess, can you help us to think about the dynamics behind that, especially in what looks to be a growth environment for you, at least for your platform?

Yes. Good morning, John. It's Steve. And so as you think about the guidance we provided from revenue, you can see that we do expect to see growth in our products. But I'd say the guidance that we're providing in our margin and the EBITDA margin is really more of a product mix shift that we're expecting to see.

As you can see, we have a broad array of products and we do expect there'll be a slight change in that mix, which might have some impact. That's the guidance and our margin.

Got it. Okay. Thanks for the color on that. And then on the $125,000,000 to $150,000,000 of cost cuts that you're looking for this year, sounds like a lot of it's going to be in the PEM segment. But can you just confirm kind of roughly how you see that mix playing out by division?

Yes, I'd say there will be continued efforts in both sides of our business, but I would say that areas and areas such as in logistics and procurement are going to be areas that are going to be big contributors. Those do impact not only the PIM side, but also the hip side of the business. So there is efforts to really look to optimize the footprint of the business and in doing so, there will be opportunities to get benefits both in logistics procurement and then overall SG and A and just managing our budgets much tighter and tightening that belt.

Thank you. Our next question comes from the line of Patrick Cunningham with Citi. Your line is open.

Hi, good morning. We've heard over the last few weeks a bit of a tougher outlook for some of the homebuilders, maybe some suggestions of a more hawkish Fed. Any concerns this leads to further volume pressure on your end? Or is this sort of what you're kind of seeing in your mix declines? And maybe if you could comment on the areas of strength, whether it's R and R, public infrastructure, benefits from PVCO that kind of gives you confidence in that 5% to 7% target for the year?

Yes. We do continue to see some growth and you can see that we're looking at consultants. We see 1.3%, which was similar to starts in 2024 being similar to what we expect in 2025. Certainly, I think that is the commentary you're hearing from many of the builders. But I would say that we have confidence in the team and you can see that we're guiding to really have a growth in market penetration in this space.

And so as we think about having the opportunity to grow our overall platform geographically and from a product perspective, we continue to think that we'll see good growth in overall revenues. As I mentioned earlier in my comments, I do think there'll be some product mix that could cause some compression in the delivery margin that we had in 2024, but certainly we're working very diligently to see what we can do to keep that margin as strong as possible given the market dynamics.

Understood. And then just a question on tariffs, specifically on PVC. Have you seen any impact on trade flows from some of the existing ADBs and tariffs against The U. S? And do you expect potential for these tariffs and maybe even retaliatory tariffs down the road to have a negative impact on U.

Yes. So we're certainly watchful of the potential impact of incremental tariffs that could arise and any retaliatory tariffs that may come from other trading partners. But to your question, we have seen products shift in terms of trade patterns all throughout the course of this past year or so. And I do expect that should there be additional tariffs or countervailing tariffs that there could be other changes in product flows as well. It's something that we'll just have to continue to monitor and react to as circumstances develop.

Our next question comes from the line of Salvator Tiana with Bank of America Securities. Your line is open.

Thank you very much. Firstly, I want to go back to your hit guidance. And you mentioned that the margin issue is mostly a shift to in the mix. So firstly, can you elaborate a little bit on what are these products that you expect to gain share versus what may lose share or you may not grow as much? And secondly, last year, I think you started with a similar guidance, perhaps actually even lower on the margin front and you delivered 24% EBITDA margin.

So how conservative, I guess, would be the same way to ask is this guidance and what's the opportunity for upside here as we saw last year?

Yes. Well, clearly as we think about the guidance we provided historically, we've tried to give you some clarity in terms of how we see the year progressing. And at this early stage in February, we do expect that the business will continue to see, as I say, that 1,300,000.0 starts as we've seen from consultants. But I think the guidance we're providing us, I think, in line with a rather conservative approach that we've taken historically. And so certainly there are mix of products that are in our portfolio that have stronger or less strong portfolio margins in those.

And so as we think about the approach that we're taking in the marketplace, we're going to remain competitive. And there is a degree naturally of conservatism in our outlook as we look forward into 2025 given the relatively flat housing start numbers we have for this year relative to last.

Okay, perfect. Then I also want to ask specifically about pipes and feedings. There was a note in your presentation that there were competitive pressures there and I believe that has been the main source of margin upside for you in the past couple of years. So can you elaborate a little bit more what's going on there, whether it's lower demand or increased supply? And what's kind of the outlook for '24 versus '20 for '25 versus '24 specifically for this product?

Well, you can see from our prepared remarks, we called out both pipe and fittings as well as siding and trim as strong contributors in the fourth quarter. Of course, there has been some additional capacity in the marketplace, but we continue to see that our portfolio being broad and deep and having a broad geographical fit allows us to address market demand as market situations in these various geographical markets play through this year. So we remain, I think, very constructive in our outlook in the hip side of the business and think that that broad portfolio as well as that broad geographical footprint provides us the opportunity to meet demand wherever it might be, be it on the West or the Southeast, the Far West or the Northeast.

Thank you. Please stand by for our next question. Our next question comes from the line of David Begleiter with Deutsche Bank. Your line is open.

Thank you. Good morning. Just on PEM, could you help us with the bridge from Q4 to Q1 given the FIFO impacts, the Petro one outage, higher ethane prices and other drivers?

Yes, David, as you think about that, certainly as we saw some significant headwinds both in feedstocks as well as in overall pricing at the end of this past year and certainly with some of the pricing dynamics we've seen in the first few months of the New Year. So clearly you understand in a falling price environment, we certainly face a headwind given our FIFO approach. And so as we think about the outlook, we continue to see strength really in some of the feedstocks and we'll continue to see price nominations to address that. You've seen price nominations in many of our product portfolio offerings, polyethylene, PVC, caustic and others. And these are all designed to address both the demand picture we're seeing as well as some of the input cost pressures we're also seeing.

Very good. And just on epoxy, Steve, can you address your performance in Q4 and your expectations for at least maybe the first half of the year?

Yes. So I would say, David, that business continues to see some improvement. I think you're well aware of the actions that we've seen both in Europe and The United States with any dumping provisions. And I would say that we've also seen a result of some of those actions improvement in overall demand. And I would expect to see that continue into 2025.

I don't see certainly the recovery we would like to see until we get beyond '25, but I do expect the trends will improve.

Thank you. Our next question comes from the line of Christina Lowe with JPMorgan.

This is Jeff Zekauskas. Can you tell us what the volume and price change was for the year in each of your two segments?

Yes. So Jeff, good morning. And so when you think of the volume changes that we saw really in the PIM side, we saw for the year, year over year about a 6% improvement in volumes in PIM and about an 8% improvement in HIP. Again, this is 24% versus 23%.

Price was down in PEM. It was down about 12% and down about 6% for hip.

And the thing about your PEM business is your EBIT was negative. Where does that come from? Is that PVC? That is what businesses inside of PEM had negative EBIT?

And so Jeff, while we don't break down the discrete strategic business units within PEM, I would say that we certainly saw pressures in that core vinyls chain. And so I would say that the biggest pressure was really on the Vinyls side of that Coravinyls chain, really in the Vinyls chain, less so in the caustic Chloroquine ECU side of that chain.

Please standby for our next question. Our next question comes from the line of Aleksey Yefremov with KeyBanc Capital Markets. Your line is open.

Thanks. Good morning, everyone. Free cash flow in 2024 was relatively modest compared to EBITDA or net income. Could you provide any outlook for 25% again as a percent of EBITDA net income or any other way?

Yes. So, Lexi, I do expect that with the continued strength that we're seeing really in the hip business and some of the pricing action that we've seen on the PEM side, certainly that will pull some on working capital and we certainly gave some guidance for CapEx this year. But I do expect a stronger performance really in the free cash flow generation in 2025. We've seen strength continued as Jean Marc had in his comments. We have a number of years, five years growth of performance in the hip side of the business.

And as I mentioned earlier, we've seen price initiatives across the product spectrum in our PEM business. We've certainly seen volume pick up, which is the driver behind the price initiatives. And so certainly I do expect that we'll see stronger growth in our free cash flow generation in 2025.

And maybe as a follow-up to that, Steve, as you are growing your hemp business, is that the business that requires more working capital? And that will it be more capital intensive and perhaps your free cash flow conversion would be lower as that business grows going forward?

No, it actually is a asset light business relative to the PIM side of the house. So it does not require that large on a percentage basis of inventory or working capital relative to the PIM side of the business.

Thanks. Please stand by for our next question. Our next question comes from the line of John Roberts with Mizuho. Your line is open.

Thank you very much. On the PEM 1% volume growth, you mentioned that export polyethylene was up. So presumably the rest of the business had flat to down volume. Epoxy was down. Could you maybe give us some volume commentary on the other parts of the PEM portfolio?

Yes, John, we don't usually break out by strategic business unit those components, but it's clear when you think about the contributions that some of the headwinds we saw were in the core vinyls chain. So as I mentioned earlier to one of the questions really in the core vinyls chain and that's really where we saw some pressures, not only in price, but also in volumes.

And will the Louisiana tax law change affect the go forward taxes at all?

No, the guidance I provided of twenty three percent really reflect the changes that were made. And as I mentioned earlier in my prepared remarks, certainly we're in discussions with the state about their allocation, their apportionment allocation to see what we can do to mitigate the economic impact of those recent legislative changes.

Please standby for our next question. Our next question comes from the line of Michael Leithead with Barclays. Your line is open.

Great. Thank you. Good morning, team. I wanted to go back to the hip revenue guidance. At the midpoint, I believe it's about 4% growth year on year.

How should we think about the relative price and volume contributors to that? Should we expect price to continue to be a drag and volumes to be up above that 4% number or just how should we think about that?

This business is very much a regional business in terms of how we think about the discrete markets. And so you can see we're guiding up on revenues. And the conservatism that you see in our guidance for margin, EBITDA margin is really reflective of the fact that we see a relatively flat number of starts in '25 relative to '24 and likely a change in some product mix given the earlier dialogue that we're having with our distributors who are servicing these builders. So as we think about the outlook, we continue to see really a strong performing business in hip and expect it to continue to perform quite well in the coming year.

Okay. But I guess my question was, do you expect price to be negative in 2025 or no?

No, I think that what you're seeing really is certainly some cost creep coming through on the Vinyl side of the business and we fully expect to be able to handle that through price nominations in our Vinyl related building products. And certainly some of the other inflationary costs coming through in our other components. I do expect that we'll be able to deal with that in discussions with our distributors for products.

Okay, fair enough. And then just bigger picture, you have a very nice building products business that's growing within Westlake Corporation. You highlight the success in a new slide in the deck, but your stock price and your equity valuation today is currently trading cheaper than many of your commodity chemical peers. I guess, how do you think about addressing or closing that valuation discrepancy such as through buybacks separating the company or just other means?

So when you think about the value contribution that our hip side of the business is delivering, when you think about the overall enterprise value that is there, actually an investor today is actually getting the PIM side of the business frankly for free. And I think therefore it reflects the fact that we're really being significantly undervalued as an enterprise. So as you've seen the very strong performance in our business not only this year in hip but over the last five years and you've seen the guidance we're providing for the current year of 2025. I think the market is just frankly undervaluing the entire enterprise of the business.

Please stand by for our next question. Our next question comes from the line of Kevin McCarthy with Vertical Research Partners.

Steve, just to follow-up on the comment that you just made. How would you describe the amount of patients that management would have in enduring a highly undervalued enterprise? In the past, I think you've extolled the virtues of integration, right, upstream and hip and downstream for that matter. But if this sort of valuation disconnect were to persist, might you take action in terms of separating the businesses at some point in the years to come?

Kevin, I understand the question. And when you think about the integration, we see a wide number of benefits of that product integration between the PIM side and the hip side of the business. And so certainly, we all recognize that the PIM side of the business has been in an extended trough, but you're actually seeing some price initiatives here to address some of the prices that were given up in earlier this year and last year. So I think as those demand volumes begin to pick up on the PIM side and our prices begin to reflect that increased demand and frankly increased input cost in the form of ethylene and ethane, I believe the market will begin to recognize the real strength and the leverage the earnings leverage that we have embedded in the PIM side of the business. I think the hip side of the business, we expect to continue to perform very well in 2025, but I think the market is underestimating the earnings leverage that we have in the PIM side of the business as we see volumes and pricing action begin to unfold as we would expect in 2025.

Fair enough. I wanted to ask about the recent months. So I appreciate your reporting the fourth quarter results, but here on the February 24, I was wondering if you could comment on your recent demand experience in major product lines like polyethylene and PVC in January and February relative to normal seasonality? Is that on par or any better or worse than you might have previously anticipated?

No, I think it's a good question, Kevin. And so as you think about and I'll start first with polyethylene. As you think about our polyethylene business, we continue to see good strength and demand on that front. And I think you're aware that we've had price initiatives out in January and February and now March for polyethylene. And while not all of those have yet settled, February is not settled nor of course March, that is reflective of good demand.

Of course, there is some cost creep we're seeing in our inputs, but I think it's also reflective of the export market that we're seeing and that's really the strength behind these price dominations in polyethylene. Likewise, when you think about our caustic businesses, we've also seen a series of announcements by others as well as our own that will go into effect in April of this year. You may be aware that we've made some nominations of price and again that's based really on the strength we're seeing across the space in the business, but certainly also coming from the alumina side, which is a significant absorption market for caustic soda. So when I think about PVC, you heard my comments around building products and of course that's going into pipe and siding and trim, which is pulling on PVC volumes. So we've also made nominations in February and March for price increases in our vinyl resin.

And we do think the strength we're seeing downstream should help us with some of those price nominations in vinyl.

Please standby for our next question. Our next question comes from the line of Josh Spector with UBS. Your line is open.

Westlake (WLK) Q4 2024 Earnings Call Transcript

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