Westlake Corporation

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation fourth quarter and full year 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, you'll be invited to participate in a question and answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, February 24th, 1st, 2023. I would now like to turn the call over to today's host, Jeff Holley, Westlake's Vice President and Treasurer. Sir, you may begin.

Thank you, Justin. Good morning, everyone, and welcome to the Westlake Corporation conference call to discuss our fourth quarter and record full-year results for 2022. I'm joined today by Albert Chao, our President and CEO, Steve Bender, our Executive Vice President and Chief Financial Officer, Roger Kearns, our Chief Operating Officer, and other members of our management team. During the call, we will refer to our two reporting segments, performance and essential materials, which we refer to as PEM or materials, and housing and infrastructure products, which we refer to as HIP or products. Today's conference call will begin with Albert, who will open with a few comments regarding Westlake's performance. Steve will then discuss our financial and operating results, after which, Albert will add a few concluding comments, and we'll open the call up to questions. 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 Form 10-K for the year ended December 31, 2021, and other 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 reported on this call speaks only as of today, February 21, 2023, And therefore, you're advised that time-sensitive information may no longer be accurate as 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 would like to turn the call over to Albert Chao. Albert?

Thank you, Jeff. Good morning, everyone. We appreciate you joining us to discuss our fourth quarter and full year 2022 results. For the full year of 2022, we reported record net income of over $2.2 billion, or $17.34 per share, and record EBITDA of $4.2 billion on record sales of $15.8 billion. While 2022 was a record year, it was also a challenging year as we experienced energy volatility, rapidly rising interest rates, EVOLVING COVID POLICIES IMPACTING ASIAN DEMAND AND MARKET DISLOCATIONS DUE TO THE WAR IN UKRAINE. AS THESE OBSTACLES EVOLVED AND DROVE MORE DIFFICULT ECONOMIC CONDITIONS IN THE SECOND HALF OF THE YEAR, WESTLAKE TOOK PROACTIVE ACTIONS TO NAVIGATE THE SLOWER GDP GROWTH WITH COST SAVINGS INITIATIVES. THESE BROAD-BASED 2022 INITIATIVES INCLUDED reductions in overhead and energy costs, synergies from acquisitions and investments in digital and automation that lowered our costs by approximately $50 million, and also drove operational efficiencies. Thanks in part to these actions, and despite the challenging external environment, for a second consecutive year, we achieved records for sales, EBITDA, and net income. with EBITDA almost doubling from the previous cycle high in 2018. I want to take a few minutes to review several of our major accomplishments in 2022. We generated record cash from operations of $3.4 billion. This significant level of cash flow allowed us to return $270 million to investors in the form of dividends and share repurchases. retire $250 million in debt, deploy $1 billion to improve the reliability of our plants, and grow our production capacity to meet customers' needs, close $1.4 billion in acquisitions, and grow our ending cash balance by $300 million. The evolution and integration of our business continued in 2022 as we closed the epoxy acquisition and increase our ethylene integration with the additional investment into our LACC ethylene joint venture. Integrating these businesses into Westlake, as we have with Borough, Lascaux, and Diamant acquisitions, which closed in 2021, drove synergies in 2022. We are committed to investing and delivering strong risk-adjusted returns across the economic cycle as we prioritize higher return, lower risk, and faster payback investments. Our deployment of growth capital in 2022 included several organic projects, including the bottleneck work that increased our capacity by 120,000 ECUs, in addition to a number of cost reduction initiatives. The evolution of our business through both acquisitions and organic growth efforts drove the need for added clarity, which we provided by resegmenting the company into the performance and essential materials segment, PEM, and the housing and infrastructure product segment, HIP. Our new segmentation emphasizes the higher value chemical and building products we manufacture. This evolution of our business spurred the changing of our name from Westlake Chemical to Westlake Corporation, which better represents the significant breadth of the products we produce and industries we serve. Decarbonizing our assets and drive sustainability remain important initiatives and growth opportunities for Westlake. As part of our sustainability efforts, we established a carbon reduction goal to reduce our scope one and scope two emission intensity by 20 percent by 2030. I'm happy to report that by the end of 2022, we were already approaching a 15 percent reduction. As part of that commitment, we continue to pursue new and innovative materials, technologies, and leverage our nine global R&D centers to advance and commercialize specialty sustainable products, such as our polyethylene one-palette solution and GreenVine chloro-vinyl product lines, among others. Taken together, I'm very proud of our 2022 accomplishments, and I would like to thank our 16,000 team members for their hard work and dedication that contributed to these accomplishments and record 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 2022.

Mr. Thank you, Albert, and good morning, everyone. Westlake reported net income of $232 million, or $1.79 per share, in the fourth quarter on sales of $3.3 billion. Net income for the fourth quarter of 2022 decreased $412 million from the fourth quarter of 2021 as a result of lower production and sales volumes in each segment adjusted for the acquisition of epoxy, lower performance materials average selling prices in PVC, polyethylene, and epoxy, and higher feedstock fuel and energy costs, particularly in Europe. When compared to the third quarter of 2022, net income decreased by $169 million in the fourth quarter of due to customer destocking, seasonal demand trends, and sales mix shift to export markets. Looking back, there were many challenges in the fourth quarter, but three stand out. First, geopolitical conflict continued to drive high energy costs in Europe throughout 2022, pressuring our margins and impacting economic and industrial activity in the region. In response to this environment, We lowered operating rates at our European epoxy and vinyl plants during the fourth quarter and continue to serve our customers from our global footprint. Second, we saw customers becoming more cautious in response to weaker macroeconomic conditions, resulting in a destocking of customer inventories and slowing new orders, which impacted our sales volume. This destocking was most impactful for us in housing-related products in our HIP segment as well as PVC resin demand within our PEM segment. Third, this weaker demand caused us to shift more of our North American polyethylene and PVC resin sales volumes to export markets, where pricing and netbacks were lower than our traditional domestic market channels. This sales mix shift to greater export volumes negatively impacted our average selling prices and margins for PVC and polyethylene within our PIMS segment. Taken together, we experienced lower sales volume lower average selling prices, and tighter margins for PVC and polyethylene when compared to the fourth quarter of 2021. For the fourth quarter of 2022, our utilization of the FIFO method of accounting resulted in an unfavorable pre-tax impact of $45 million compared to what earnings would have been reported if we'd been on the FIFO method. This is only an estimate and has not been audited. For the full year of 2022, we reported net income of $2.2 billion and EBITDA of $4.2 billion on sales of $15.8 billion. Industry supply chain and product availability constraints increased our order backlogs and average selling prices in the first half of the year, leading to high operating rates and profitability. However, in the middle of 2022, in response to softening macroeconomic conditions, sales volumes began to weaken, moving selling prices lower in PVC and polyethylene within performance materials, while driving a sharp reduction in housing and infrastructure product sales volumes. As the second half of the year progressed into the fourth quarter, weaker in-use demand, along with elevated customer destocking activity, drove sharply lower sales volumes in epoxy and polyethylene within PIM, and nearly every product line within HIP. As a result, PIM volumes fell 3.5 percent, while HIP sales fell 24 percent in the fourth quarter compared to the third quarter. We also saw average selling prices for PVC and polyethylene fall sharply, driving PIM average selling prices lower by 9.4 percent in the fourth quarter compared to the third quarter, along with a larger export product mix in performance materials. One notable exception was chloralkali. where average selling prices for both caustic soda and chlorine continued to improve as 2022 progressed. At the same time, HIP maintained average selling prices in the fourth quarter compared to the third quarter, with some gains in our exterior building products offset by declines in PVC compounds. Moving to our segment performance, our performance in essential materials segment, fourth quarter 2022 EBITDA of $443 million decreased $554 million from the fourth quarter of 2021. As compared to the prior year period, performance materials sales in the fourth quarter decreased $378 million, largely driven by lower selling prices, particularly PVC resin, as customer inventory destocking led domestic sales volumes to decline much greater than in-use demand levels. Meanwhile, essential materials sales in the fourth quarter of 2022 increased $279 million over the fourth quarter of 2021, primarily driven by higher average selling prices for caustic soda. As compared to the fourth quarter of 2021, our earnings were impacted by lower integrated margins for all of our products in our performance materials business, especially in global PVC markets, lower production and sales volumes for chloralkali and PVC resin, particularly in Europe, higher feedstock, fuel and power costs, and higher turnaround activity. These headwinds were partially offset by higher production and sales volumes for polyethylene and higher sales prices for caustic soda, where the global supply-demand balance tightened as a result of lower global chloro-vinyl operating rates. Penn's segment EBITDA of $443 million in the fourth quarter decreased $118 million from the third quarter of 2022. This sequential decline in EBITDA is a result of lower integrated margins for performance materials, particularly PVC and lower production sales volumes for polyethylene, chlorine, caustic soda, VCM, and epoxy resins, partially offset by higher sales prices for caustic soda. Turning to our building products business, building and construction markets were particularly impacted by rising interest rates, but housing starts declining by approximately 22% year over year in December. Against this backdrop, HIP segment EBITDA for the fourth quarter of 2022 decreased $29 million to $133 million when compared to the fourth quarter of 2021. Housing product sales decreased $85 million, which reflects the significant destocking I mentioned earlier. Compared to the fourth quarter of 2021, driven by the 22% volume declines across our product offerings. Infrastructure product sales fell $24 million from the fourth quarter of 2021 as a result of broad-based volume declines, particularly in a large diameter PVC pipe. These volume declines were only partially offset by higher prices, both in housing and infrastructure businesses. When compared to the third quarter of 2022, HIP segment EBITDA of $133 million decreased $121 million. Housing product sales of $758 million in the fourth quarter of 2022 decreased $260 million while infrastructure product sales of $180 million in the fourth quarter of 2022 decreased $47 million from the third quarter of 2022. The lower sales and earnings were the result of lower sales volumes across all lines in our HIP business due to both seasonal trends and slowing U.S. housing construction activity. Now turning to the balance sheet and cash flows, Westlake's cash flow generated reflects our strong continued focus on operational and financial discipline matters. For the full year of 2022, net cash provided by operating activities was a record $3.4 billion, while Capital expenditures were $1.1 billion, resulting in free cash flow of $2.3 billion. In 2022, we retired $250 million in debt, renewed our committed line of credit of $1.5 billion for five years. We closed on $1.4 billion of acquisitions that were fully funded by cash on hand. As of December 31, 2022, cash and cash equivalents were $2.2 billion, and total debt was $4.9 billion, with our net leverage remaining below one turn of EBITDA. We maintain a strong balance sheet with a staggered long-term fixed rate debt schedule. We will look to strategically deploy our balance sheet for value-creating opportunities as they become available. Turning our attention to 2023, let me address some of our modeling questions and provide some guidance for the year ahead. Based on our current view of demand and prices, we expect 2023 revenue in our HIP segment to be between $4.3 and $4.8 billion with EBITDA margin in the high teens. We expect total capital expenditures to be approximately $1 billion, similar to our depreciation run rate. For 2023, we are prioritizing quick return projects while also allocating appropriate amounts to maintain and operate our facilities safely. This includes a planned turnaround at our Calvert City Ethylene Unit scheduled to begin in May that is projected to last approximately 30 days. For the full year of 2023, we expect our effective tax rate to be approximately 23%. We also expect cash interest expense to be approximately $160 million. Now let me turn the call back over to Albert to provide a current outlook of our business. Albert?

Thank you, Steve. During the fourth quarter, we saw deteriorating economic conditions that led to inventory stocking, resulting in lower demand for our products and well-supplied markets. Since year end, we have seen modest improvements early in the first quarter in demand for polyethylene and PVC, with improving feedstock and energy costs, providing some margin tailwinds. The large markets for epoxy in Asia and Europe reflect slush demand as China begins its economic recovery and Europe continues to address its own economic and energy challenges. Looking ahead, while uncertainties remain in the macroeconomic outlook, we believe there are some positive trends appearing. Energy costs have improved, particularly in Europe, albeit still at elevated levels. FORECAST FOR U.S. HOUSING STARTS RANGING FROM 1.1 TO 1.3 MILLION UNITS OVER THE NEXT TWO YEARS, WHICH WILL BE A 20% DECLINE FROM THE 2021-2022 LEVELS. EVEN WITH THE STRENGTH IN HOUSING CONSTRUCTION THAT OCCURRED OVER THE PAST TWO YEARS, ANNUAL NEW HOUSING CONSTRUCTION LARGERLY REMAINED BELOW THE 50-YEAR AVERAGE OF 1.5 MILLION UNITS. we continue to have a deficit from underbuilding that occurred since 2007. As a leading producer of building products, Westlake is well positioned to benefit from the eventual recovery of U.S. new home construction back to a normalized level that supports the strong demographic and household formation trends that are taking place. In the meantime, although new construction growth has recently stored repair and remodeling or R&R spending, which comprises approximately half of our building product sales, is forecasted by industry consultants to continue to grow in 2023. We are cautiously optimistic on the future as there have been some recent positive economic signals. However, inflation and geopolitical tensions continue to weigh on consumer spending and industrial activity. Thus, we remain focused on actions that are within our control to grow shareholder value, including prioritizing quick payback capital projects, progressing our sustainability goals, including continued support for new product innovations, such as green-winged caustic soda and PVC, polyethylene one-palette solutions, and PBCO pipe, maintaining our investment grade credit rating and strong balance sheet, which had $2.2 billion of cash at the end of 2022. Using our strong balance sheet with ample liquidity to look for attractive opportunities to deploy our robust cash generation in a disciplined manner, including returning cash to shareholders through both dividends and share repurchases. and identifying acquisition candidates that can exceed our cost capital while extending the breadth and reach of our portfolio. Given the dynamic economic environment, we will continue to take a business-by-business approach to manage our operations and adjust to market conditions. This begins by maintaining a low cost to serve our customers, by operating our plants safely and efficiently, reducing overhead costs, and increasing productivity with our automation and digital investments. With this in mind, we're working on a number of initiatives that are expected to deliver an additional $55 to $105 million of annualized savings in 2023. Thank you very much for listening to our fourth quarter earnings call. I will now turn the call back over to Jeff.

Thank you, Albert. Before we begin taking questions, I'd 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'll provide that information again at the end of the call. Justin, we will now take questions.

And thank you. As a reminder to ask a question, please press star 1-1 on your telephone. and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And we please do ask that you limit yourself to one question and one follow-up. Again, we ask that you limit yourself to one question, one follow-up. One moment for our next question. And our next question comes from Alexi Yermoff. from KeyBank Capital Markets. Your line is now open.

Great. Thanks, guys, for taking my question. Good morning. It's Ryan for Alexi. I guess the first question I would ask you is you talked about the mix in polyethylene and PVC during the quarter with higher exports. Can you maybe talk about what you've seen so far in 1-2 and what you might expect for the rest of the year?

Yeah. Hi, Alexi. This is Roger. Good question. Thank you for that. Certainly, I would say the destocking that we talked about, we felt it pretty hard in polyethylene and PVC both on the domestic market in the U.S. And so we shifted a tremendous amount of our material in Q4 to the export markets in both of those. What we're seeing in Q1 is, I would say, a return to a bit more normal numbers that we would see. So I think through January and February so far, we're seeing a little bit of a rebound on the domestic side, which is allowing us to get back to what I would consider more normal.

THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU.

THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. THANK YOU. Albert spoke to, about 80% of that relates to improvements in logistics and procurement initiatives, and the other 20% is really additional synergies that we see coming from the opportunities from the acquisitions that we took.

Great. Thanks, guys.

And thank you. And one moment for our next question. And our next question comes from Kevin McCarthy from Vertical Research. Your line is now open.

Good morning. Steve, your cash flow from operations came in a bit higher than we had forecast. So could you comment on your work and capital experience in 2022 and how you would expect working capital to trend in 2023?

Yeah, Kevin, good question. And so as you could see, we continue to see, you know, the growth in the business. And with the elevated pricing that we saw in the first half of 2022, in the latter half of 2022, we continue to collect those higher dollar valued receivables. And of course, as prices continued to decline during the second half of 2022, those were replaced with lower valued dollar receivables. So a strong cash flow year in 2022. As you can see from Roger's comments earlier, seeing some pickup in demand and that product shift back to more of a domestic-weighted business where we have better pricing and better margins, I would expect to continue to see a strong and robust cash flow, as you mentioned, that we had in 22. Obviously, as we go forward, we'll see where prices trend, but I still expect that we'll still see strong cash flows in 23 as we march forward.

And then secondly, if I may, in the segment information that you provide, corporate and other is usually an expense. And if I'm reading this quarter correctly, it looks like it swung to a $40 million source of income. Is that correct? And if so, what is driving that swing?

Yeah, Kevin, that is correct. And so we had kind of a non-recurring item that I would characterize. It was a release of a PBC-related reserve. And so it's kind of a non-recurring item. You're right. We typically have a headwind there between $10 and $15 million in the quarter. But this quarter, we certainly had a benefit this quarter.

Thanks very much.

And thank you. And one moment for our next question. And our next question comes from from Barclays. Your line is now open.

Great. Thanks. Good morning, guys. First question, just on energy prices in Europe. Obviously, they've come down quite a bit the past few months. Have you started to pick back up your utilization rates in Europe, or does it still not make much sense? I guess, can you speak to just the relative economics to maybe supplying Europe from U.S. or other areas versus kind of domestic production as we sit here today?

Yeah, Mike, thanks. It's Roderick. Certainly we saw with the extremely high energy prices in Europe, Europe was in a situation where it could not be competitive at all in the world. And so we had production rates down very low late in Q4. I think what we're seeing now with the lower energy rates is we can compete, and we can even do some exports from Europe, which is helping us get the operations back up. I would not say we're back to full speed. But we're significantly better now in Q1 than we were in Q4, I would say. And that's both the epoxy business and the vinyls business that we have there.

Great. That's helpful. And then second, I know you kind of touched on a little bit about some pickup and demand as we started the first quarter. Can you speak to China, I guess, the early days, but just kind of what you've seen coming out of winter and new year there and from the demand standpoint in that region? Sure.

Yeah, this is Albert. Certainly China's COVID event seems to have gone in China. People are going back to work and people are going to the streets. But the economy is still weak. I think it takes a while for the economy to pick up. And the government is doing a lot to try to stimulate the economy. So we expect sometime in the end of the first quarter, beginning of the second quarter, things will improve a lot more than today.

Great. Thank you. You're welcome.

And thank you. And one moment for our next question. And our next question comes from Josh Spector from UBS. Your line is now open.

Yeah, hi. Thanks for taking my question. I'm just curious with HIPP, Can you talk about, is there a percentage of that segment which has a normal start of year pricing reset that we should be considering in our model?

Yeah, I think most of the pricing reset and HIP and also in PAM pretty much started at the end of the year. So maybe some small portion is in the beginning of the year, but mostly it's happened in the 2022 year end. Okay.

I guess maybe digging that a bit more then. So, I mean, pricing was pretty stable sequentially, which was a pretty impressive result. I mean, PVC prices are off maybe 10, 20%. So, is that more of a December comment that's enrolled in early part of this year, or am I just missing it through the noise of other things within the segment? Thanks.

Yeah, Josh, I would say pricing did remain relatively stable in building products. And what we're seeing in the first of the year is, you know, we've seen a penny increase in PBC in January. There's another nine cents of increases announced for the next two months. So I think that future look of where PBC is going is moderating changes in the building products pricing.

Okay. Thank you.

Thank you. And there will be one moment. And one moment for our next question. And our next question comes from David Begleiter from Deutsche Bank. Your line is now open.

Thank you. Good morning. Albert, on polyethylene, you got a three cent per pound increase in January. I know there are six cent per pound increase out there for February. What's the potential, you think, for additional polyethylene price increases in February, maybe even March?

Yeah. Polyethylene, there has been a lot of price adjustments, year-end adjustments. So, in January, we had a $0.03 price increase offset by non-market adjustments. And I think, depending which consulting you're looking at, in chemical market analytics, CMA, they are looking at additional 3 cents decrease in May, and that's flat through the year. However, the industry, we have additional 3 to 5 cents a pound price announcements in February, and it's trying to recoup some of the price decreases that occurred last year. So, time will tell with the strength of China recovering, I think overseas prices are improving. So export prices are improving overseas. There could be some benefit of increasing the prices in February or March.

Very good. And just on caustic, Albert, do you think caustic prices can hold up here in this current environment? Thank you.

Yes, that's a good question. I think, you know, caustic prices has really performed very well in 2022. and some of the industry consultants are projecting prices to gradually come down this year through the first half into the third quarter. And as the PVC demand increases across the world, there will be more production of caustic and more supply of caustic, so possibly caustic price will ease during the year.

Thank you.

You're welcome.

And thank you. And one moment for our next question. And our next question comes from Michael Sison from Wells Fargo. Your line is now open.

Hey, good morning. I think you all mentioned that demand looks a little bit better first quarter for PVC polyethylene. Are your operating rates going to go up sequentially? And given the lower costs that you're seeing, should margins or EBITDA improve as we head into the first quarter or the fourth directionally?

Yeah, Michael, it's Roger. So certainly I would say we're seeing in Q1, and based on the North American advantage, both PBC and Polyethylene can run strong. So I think the demand kick that we're picking up in domestic helps us make our as I say, looking much more of a normal mix between export and domestic. So, yeah, I would say we'll continue to run our plan strong in the first quarter.

Okay. And then for HIP, you gave us a range for sales for 2023. There are some folks who think the second half will be more difficult. Some folks think the first half might be more difficult. Any thoughts on how the to have sort of work out in your hip outlook, better first, maybe worse second, or just any thoughts there?

Yeah, so Mike and Steve, and so I would say that you see that, you know, we've come down dramatically from the end of the, from over 22, as we saw a lot of, in effect, pullback because of rising rates. And so as you think about where the Federal Reserve is moving with their move on rates, there is an expectation that those rates begin to kind of slow down in terms of the level of increases. And there is a lot of market chatter about that slowing toward the end of this year. And I think if there is a sentiment that rates begin to plateau, that you could see some more positive sentiment come into the market. I would note that the Mortgage Bankers Association has seen a recent increase in applications. And that tells you that consumers are becoming a bit more confident as they look forward that these rate increases will be less aggressive and home prices become more affordable. So there is some probably market view that probably the second half is a more constructive half of the year than the first half of the year.

Thank you. And thank you. And one moment for our next question. And our next question comes from Duffy Fisher from Goldman Sachs. Your line is now open.

Yes, good morning. First question is just around the epoxy acquisition. You're kind of a year into it now. It's been a tough year. So can you do an after-action review? I mean, does the industry need to have some structural change? Does your business need to have some structural change? Or is this just really kind of a bad supply-demand setup right now that will fix itself over the next couple of years?

Yeah, thanks, Debbie. It's Roger. Maybe a couple comments there. I think, you know, epoxy business for our first year. We started extremely strong. The first part of the year was a very strong part of the business. But as we moved through the year, it certainly got weaker. And by the end of the year, I would say the fourth quarter was really quite weak. I think there's a couple things as we look forward. We have seen China announce already in 23 nearly a doubling of the wind energy installations over 22. So we'll have to watch and see how that plays out, but that should be kind of a nice boost in the markets. As you know, there's a limited number of western players. We'll continue to do what we do, which is make our plants run more efficiently, more cost-effective. We'll copy our Westlake model into those sites. So I think there's some self-help work we'll do, but hopefully as well with aviation, automotive, and some wind energy picking up a little bit in 23, we can get the the 23 looking better than certainly the end of 22. Fair enough.

And then the stat or the projection you threw in there on remodel and repair at 2.6% for the year, one, is you're just talking to your customers, is you're looking at your order book. Does that feel like kind of the right number? And then maybe like a follow-up to the last question, if that ends up being the right number, how does that look first half versus second half, do you think?

So Duffy, it's Steve. And I would say that the tone that we saw at the builder's show recently was constructive, and I think it aligns with the tone that we saw from those that visited the builder's show. And certainly there is some expectation that will continue on as we go forward. Typically when housing starts slow, repair and remodeling shows strength. And so there is a typical investment cycle that homeowners always undertake, and that is they're either improving their home either to sell to move forward or improving their home because affordability to move on to a new home is too expensive. So we do think that that aligns with the tone we're hearing from our customers and consistent with the contributions we think it will make to the business over the course of 23. Great.

Thank you, guys. And thank you. And one moment for our next question. And our next question comes from Frank Mitch from Fermium Research. Your line is now open.

Good morning, and thank you. Steve, you mentioned that you have a big turnaround, I believe, in Calvert City in May. And I was wondering if you could provide a little more granularity. Is that pretty much the only major turnaround that you're going to be facing this year? Any sort of color there would be very helpful.

Yeah, so, Frank, you know, we do have a turnaround starting in May for 30 days. We certainly have turnarounds in many of our other units all throughout the course of the year. You know, because these turnarounds will move from quarter to quarter and change over the course of the year, we've kind of shied away from giving discrete quarter-by-quarter guidance in terms of turnarounds. It will be a slightly busier year in turnaround activity in 23. But I would say that if you look at prior years turnaround activity, it's consistent with the operating rates that we've historically had. But I called out the Calvert City turnaround because it is a turnaround that's going to be 30 days in a length and because it impacts our ethylene units and the entire site accordingly.

Great.

Thank you.

And, you know, Albert, if I could come back to the comment regarding chlorophyll and expecting to see higher volumes as we progress through the year with PVC demand improving and then therefore you get more co-product caustic soda and so therefore price might be under some under some pressure but of course we're ending the year at a higher level than we began 2022 so I'm just curious at how you think about 23 average pricing in your chloracoli business on the essential material side relative to 22? Do you think that as we look at the full year, we're looking at something like a flattish sort of environment, or do you think the degradation might be even greater than that?

Well, yes, Frank, that's a good question. One of the industry consultants, as I said earlier, looking at a gradual decline from January through September. But as you said earlier, interesting that in 2022, PRICES START LOW, WENT UP, AND THEN 2023, THE FORECAST IS FROM UP AND GET A BIT LOWER. BUT THE AVERAGE FOR THE WHOLE YEAR, FOR 2023, AS AN ASSEMBLY CONSULTANT, IS NOT THAT TOO MUCH DIFFERENT ON THE AVERAGE OF 2022. AND FOR THAT INFORMATION ALSO, THEY'RE LOOKING AT 2024. OF COURSE, IT'S A CRYSTAL BALLING. THE AVERAGE 2024 PRICES It's almost similar, again, to 2023. So people are expecting some kind of a flat in price. And the demand globally, as you know, Caustic really follows GDP. As the global economy recovers from COVID and China comes back into more normalized growth, and India is still one of the strongest emerging markets, economic growth, we will see demand for Caustic to improve. The U.S. has the lowest cost producer from a low-cost natural gas, low-cost energy, and power, and also we have available salt nearby. So I think U.S. cloaca industries will be able to capitalize on any of the demand increase around the world.

Got you. Thank you so much. You're welcome.

And thank you. And one moment for our next question. And our next question comes from Jeb Zakowskis from JP Morgan. Your line is now open.

Thanks very much. On slide four, you said that you increased your ECUs by 120,000 tons. Where did you do that? And what utilization rate or roughly what utilization rate is it running at?

Yeah, Jeff, thanks. It's Roger. You know, one of the beauties of our footprint is we've got a number of different sites, and so we're able to do low-cost de-bottlenecks in a number of different sites. And so that $120,000 comes from a couple of different projects, mostly across the Gulf Coast. But I would say, in general, for our core alkali assets, we're going to run them strong. So if we're not running them strong, it's because we've had an issue. It's not because we're trying to slow them down.

So this is all up and running and was added in 2022?

Yeah, we completed them in 2022.

Okay. My follow-up, there was a vinyl chloride release in Ohio. Do you think that that has implications for the chlorovinyl industry, or do you think that that will lead to some kind of change, or or do you have any general comments?

Yeah, I think people are waiting for the Service Transportation Safety Board to come back with a report. I'm sure there will be more government regulation on railroads and possibly on the shippers on safety. These are very important products that ship around the country, so the demand has been satisfied, but definitely we need to increase the safety by the railroads primarily, I would think, on the equipment. Some of them are getting old, and we heard there are new technologies out there to improve the safety aspect of the railroads. Great.

Thank you so much.

You're welcome.

And thank you. And one moment for our next question. And our next question comes from Matthew Skowronski From Credit Suisse, your line is now open.

Good morning. Within your housing infrastructure products margin guide, what are you assuming for raw material costs relative to 4Q levels?

Well, as we think about the margin that you've seen in our HIT business, I think you've been able to see that we've been able to be able to pass those costs through. And so as we see prices rise, and I think Roger made reference to the price nominations we have for PBC in the first quarter, we and our housing businesses have been able to see good price traction. I think you noted from one of the comments and from one of the slides that we were able to hold prices over the quarter. And so while we saw reductions in volume, pricing was actually fairly stable. And so if we see continued pressure on prices coming in on feedstocks, be it PBC or others, we'll obviously look to see what we can do to manage that. But if we have to, we'll pass those through.

Understood. Thank you, Steve. With regard to M&A, would you consider moving outside of current market verticals you already participate in?

I think you've seen that where we see adjacencies, and I would use a posse of that. I would use some of our acquisition experiences in 21, like Boral, where we saw some adjacencies that make good sense. They provide synergies to us and provide an opportunity to extend the integration model that we have, whether it's a sales integration approach that we've taken with our Boral business or whether it is a materials integration strategy that we have. They're epoxy acquisitions. So the answer is, as long as we see good synergy and good value, we'll look at adjacencies to our existing businesses. Thank you. You're welcome.

And thank you. And one moment for our next question. And our next question comes from Angel Castillo from Morgan Stanley. Your line is now open.

Hi, thanks for taking my question. Just wanted to maybe flip the exports question on its head a little bit. And as you think about a shift to more domestic, I think one of the areas that has kind of pressured the industry both kind of in vinyl but also in areas like epoxy was this idea that I guess the exports were seeing a greater degree of pressure from other regions exporting products. What are you seeing in that? I guess, competitive environment? Are you still seeing products come from Asia, or are you seeing some of that start to stay domestically more? And as you raise operating rates, how do you see that kind of evolving in terms of the impact on the export market?

Yeah, thanks. It's Roger again. I think what we've seen on the export markets for both polyethylene and PVC is a bump up in pricing around the world. So PVC is up by more than Yeah, more than a dime a pound on the export side. And so that's helping us. I would say we're still, as Albert mentioned, a little watch and see on China's recovery. But India's come out quite strong and has really been, I would say, supporting a lot of the markets heading that direction. So we're seeing improved pricing on exports. And at the same time, that helps a little bit on the, you know, impacts a little bit the pricing in the domestic market as well. But so we'll, as I mentioned earlier, our U.S. assets have a cost advantage on raw materials, and we plan to run them.

Thank you. And then you used to give a sensitivity to natural gas prices. Could you just remind us what that is today, particularly given the volatility of our operating rate, whether, you know, the lower costs should flow through on a relatively immediate basis, or if there's a little bit of a lag, I don't know if there's any factors to consider there.

Yeah, and so we, you know, the sensitivities that we've provided are still appropriate here. When you think of natural gas in our markets, you know, a dollar in MMBTU is about $106 million of EBITDA impact. And certainly when we think of in our European business, you know, a 10 euro thousand KWH is about 10 million euro impact. And that normally should flow

Quite quickly. Right. Got it. Thank you.

And thank you. And one moment for our next question. And our next question comes from Eric Petrie from Citi. Your line is now open.

Hi. Good morning, Albert and Steve. Good morning. Good morning. Just going back to the exports, you know, we saw a lot of competitive pressures from China exporting more caustic soda, more PVC. I think PVC prices in China right now are around 40 cents, closer to 90 cents here in the U.S. domestic market. So what are your expectations in 2023, and what have you seen here today out of China?

Yes, as China's economy improves and China's industry won't have to export low prices. And by the way, I think the PVC price you quoted in the U.S. is a list price, not an actual price. So certainly the U.S. can compete with any PVC producer around the world. And as Roger said, the industry is able to export and we're going forward still until the U.S. housing market returns Expo will be a big part of the U.S. PVC producers. And China, they have a very high energy cost and even coal. Some of the PVC are produced from coal-based technology, but the coal prices are also very high. So I think China, they were exporting some quantities just to keep the plants running, but as local demand improves, they will be exporting less.

Thank you, Albert. And then maybe a question for Roger on your comment of the doubling of wind installations in China. What does that do to kind of supply-to-man balances in the country? And then, you know, how much capacity is China adding, you know, this year and kind of what needs to be absorbed from last year?

Yeah, so I think wind in China is a, you know, China is a big driver of the wind market. And so, you They've got RFQs out that say about double this year what they've done last year. That's a good first step, I think, in really starting to absorb the extra capacity that's come in, as well as avoid the exports, right? So as Albert mentioned, with the China domestic markets so slow, the China producers are exporting a significant amount. I think that will turn back inside and be used in China as opposed to hitting the export markets.

Thank you.

And thank you. And one moment for our next question. And if you would like to ask a question, that is star 1-1. Again, that's star 1-1. And one moment for our next question. And our next question comes from Arun Vizwanathan. Your line is now open.

Great. Thanks for making my question.

Just curious, you know, you made the comment about, well, when new construction does return, How much of your business really is tied to new construction now? I know within building products you have some more exposure to repair and remodeling, but it's kind of muddy just because there is so many other overlapping factors. So how much of your business would you say is sales or EBITDAs maybe tied to new construction? Thanks.

Our building materials business, about 50% is targeted to the new construction market. and 50 percent to the repair and remodeling market. And as you heard earlier, Steve mentioned about the new home construction forecast to be going from 1.5 million units last year to about between 1.1 and 1.3 million units this year and next year. That's the forecast. And that's about a 20 percent drop. And repair and remodeling, as Steve also mentioned, the LIRA index, they are looking at a modest growth this year. So, you know, if it's 50-50 weighting, then, you know, 20 percent drop in new construction, modest growth in repair modeling. We foresee potentially a 10 percent reduction in volume compared to last year. So that's kind of order of magnitude estimates impact.

Great.

Thanks, Albert. And what about PEM? I mean, you know, there is the PVC resin production, but that's, you know, potentially offset by some of your infrastructure exposure there. How would you characterize the new construction exposure within PEM?

Yeah, so it's Roger again. I mean, I think, you know, we do have certainly some pull-through on the PEM side through the housing materials construction piece. The second piece we have there that I would say it's still early on is the impact on the infrastructure part of HIP from the infrastructure, the IRA, because we expect still that there'll be significant investments in water systems throughout the U.S., and so we're still at the early stages of starting to see that through. So I think those two pieces will continue to pull PVC through. An exact number, I don't have an exact number in PIM on... new construction. Think about that.

Okay. This is Albert. As Walter said earlier, the industry, whatever they cannot supply to the domestic market, they will export.

Okay, got it. And then just as a quick follow-up, you said $1.2 billion closed acquisitions in 2022. Would you expect a similar amount in 2023? Or what are your kind of preferences for cash at this point?

So, Arun, I was chuckling. You know, the answer is we look for value-added opportunities, and so it's hard to know exactly whether there will be an opportunity to transact in any particular year, but we'll always look for opportunities that are going to be value-added. And so you're right, over the last couple of years it's been a very busy period of time to really add businesses to the overall portfolio. but those were all businesses that we thought were really great additions to the portfolio that we had compelling synergies, as you can see from the numbers we've talked about earlier. So there's going to be an ongoing process, as there always has been, to look for opportunities, but it's hard to know whether those will play out and materialize in 23. Great, thanks. You're welcome.

And thank you. And at this time, the Q&A session has ended. Are there any closing remarks?

Yes. Thank you again for participating in today's call. We hope you'll join us again for our next conference call to discuss our first quarter 2023 results. Thank you.

Thank you for participating in today's Westlake Corporation fourth quarter and full year earnings conference call. As a reminder, this call will be available for replay beginning two hours after the call has ended. The replay can be accessed via Westlake's website. Goodbye.

The conference will begin shortly. To raise and lower your hand during Q&A, you can dial star 11. Hello. Thank you. Bye.

Bye. Thank you.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation fourth quarter and full year 2022 earnings conference call. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, you'll be invited to participate in a question and answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, February 24th, the 1st, I would now like to turn the call over to today's host, Jeff Holley, Westlake's Vice President and Treasurer. Sir, you may begin.

Thank you, Justin. Good morning, everyone, and welcome to the Westlake Corporation Conference call to discuss our fourth quarter and record full-year results for 2022. I'm joined today by Albert Schell, our President and CEO, Steve Bender, our Executive Vice President and Chief Financial Officer, Roger Kearns, our Chief Operating Officer, and and other members of our management team. During the call, we will refer to our two reporting segments, performance and essential materials, which we refer to as PEM or materials, and housing and infrastructure products, which we refer to as HIP or products. Today's conference call will begin with Albert, who will open with a few comments regarding Westlake's performance. Steve will then discuss our financial and operating results, after which, Albert will add a few concluding comments, and we'll open the call up to questions. 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 Form 10-K for the year ended December 31, 2021, and other 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 reported on this call speaks only as of today, February 21st, 2023, and therefore, you are advised that time-sensitive information may no longer be accurate as 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 would like to turn the call over to Albert Chow. Albert?

Thank you, Jeff. Good morning, everyone. We appreciate you joining us to discuss our fourth quarter of AND FULL YEAR 2022 RESULTS. FOR THE FULL YEAR OF 2022, REPORTED RECORD NET INCOME OF OVER $2.2 BILLION, OR $17.34 PER SHARE, AND RECORD IVIDA OF $4.2 BILLION ON RECORD SALES OF $15.8 BILLION. WHILE 2022 WAS A RECORD YEAR, IT WAS ALSO A CHALLENGING YEAR has experienced energy volatility, rapidly rising interest rates, evolving COVID policies impacting Asian demand, and market dislocations due to the war in Ukraine. As these obstacles evolved and drove more difficult economic conditions in the second half of the year, Westlake took proactive actions to navigate a slower GDP growth with cost savings initiatives. These broad-based 2022 initiatives included reductions in overhead and energy costs, synergies from acquisitions and investments in digital and automation that lowered our costs by approximately $50 million, and also drove operational efficiencies. Thanks in part to these actions, and despite the challenging external environment, for a second consecutive year, we achieved records for sales, EBITDA, and net income, with EBITDA almost doubling from the previous cycle high in 2018. I want to take a few minutes to review several of our major accomplishments in 2022. We generated record cash from operations of $3.4 billion. This significant level of cash flow allowed us to return $270 million to investors, in the form of dividends and share repurchases, retire $250 million in debt, deploy $1 billion to improve the reliability of our plants and grow our production capacity to meet customers' needs, close $1.4 billion in acquisitions, and grow our ending cash balance by $300 million. The evolution and integration of our business continued in 2022 as we closed the epoxy acquisition and increased our ethylene integration with an additional investment into our LACC ethylene joint venture. Integrating these businesses into Westlake, as we have with Borough, Lascaux, and Dymes acquisitions, which closed in 2021, drove synergies in 2022. We are committed to investing and delivering strong risk-adjusted returns across the economic cycle as we prioritize higher return, lower risk, and faster payback investments. Our deployment of growth capital in 2022 included several organic projects, including the bottleneck work that increased our capacity by 120,000 ECUs, in addition to a number of cost reduction initiatives. The evolution of our business through both acquisitions and organic growth efforts drove the need for added clarity, which we provided by resegmenting the company into the performance and essential materials segment, PEM, and the housing and infrastructure product segment, HIP. Our new segmentation emphasizes the higher value chemical and building products we manufacture. This evolution of our business spurred the changing of our name from Westlake Chemical to Westlake Corporation, which better represents the significant breadth of the products we produce and industries we serve. Decarbonizing our assets and drive sustainability remain important initiatives and growth opportunities for Westlake. As part of our sustainability efforts, we established a carbon reduction goal to reduce our scope one and scope two emission intensity by 20 percent by 2030. I'm happy to report that by the end of 2022, we were already approaching a 15 percent reduction. As part of that commitment, we continue to pursue new and innovative materials, technologies, and leverage our nine global R&D centers to advance and commercialize specialty sustainable products, such as our polyethylene one-palette solution and GreenVine chloro-vinyl product lines, among others. Taken together, I'm very proud of our 2022 accomplishments, and I would like to thank our 16,000 team members for their hard work and dedication that contributed to these accomplishments and record 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 2022.

Steve Wilson, Thank you, Albert, and good morning, everyone. Westlake reported net income of $232 million, or $1.79 per share, in the fourth quarter on sales of $3.3 billion. Net income for the fourth quarter of 2022 decreased $412 million from the fourth quarter of 2021 as a result of lower production and sales volumes in each segment adjusted for the acquisition of epoxy, lower performance materials, average selling prices in PVC, polyethylene, and epoxy, and higher feedstock fuel and energy costs, particularly in Europe. When compared to the third quarter of 2022, net income decreased by $169 million in the fourth quarter due to customer destocking, seasonal demand trends, and sales mixed shift to export markets. Looking back, there were many challenges in the fourth quarter, but three stand out. First, geopolitical conflict continued to drive high energy costs in Europe throughout 2022, pressuring our margins and impacting economic and industrial activity in the region. In response to this environment, we lowered operating rates at our European epoxy and vinyl plants during the fourth quarter and continue to serve our customers from our global footprint. Second, we saw customers becoming more cautious in response to weaker macroeconomic conditions, resulting in a destocking of customer inventories and slowing new orders, which impacted our sales volume. This destocking was most impactful for us in housing-related products in our HIP segment as well as PVC resin demand within our PIM segment. Third, this weaker demand caused us to shift more of our North American polyethylene and PVC resin sales volumes to export markets, where pricing and netbacks were lower than our traditional domestic market channels. This sales mix shift to greater export volumes negatively impacted our average selling prices and margins for PVC and polyethylene within our PIMS segment. Taken together, we experienced lower sales volume lower average selling prices, and tighter margins for PVC and polyethylene when compared to the fourth quarter of 2021. For the fourth quarter of 2022, our utilization of the FIFO method of accounting resulted in an unfavorable pre-tax impact of $45 million compared to what earnings would have been reported if we'd been on the FIFO method. This is only an estimate and has not been audited. For the full year of 2022, we reported net income of $2.2 billion and EBITDA of $4.2 billion on sales of $15.8 billion. Industry supply chain and product availability constraints increased our order backlogs and average selling prices in the first half of the year, leading to high operating rates and profitability. However, in the middle of 2022, in response to softening macroeconomic conditions, sales volumes began to weaken, moving selling prices lower in PVC and polyethylene within performance materials, while driving a sharp reduction in housing and infrastructure product sales volumes. As the second half of the year progressed into the fourth quarter, weaker end-use demand, along with elevated customer destocking activity, drove sharply lower sales volumes in epoxy and polyethylene within PIM, and nearly every product line within HIP. As a result, PIM volumes fell 3.5%, while HIP sales fell 24% in the fourth quarter compared to the third quarter. We also saw average selling prices for PVC and polyethylene fall sharply, driving PIM average selling prices lower by 9.4% in the fourth quarter compared to the third quarter, along with a larger export product mix in performance materials. One notable exception was chlorocolyte. where average selling prices for both caustic soda and chlorine continued to improve as 2022 progressed. At the same time, HIP maintained average selling prices in the fourth quarter compared to the third quarter, with some gains in our exterior building products offset by declines in PVC compounds. Moving to our segment performance, our performance in essential materials segment, fourth quarter 2022 EBITDA of $443 million decreased $554 million from the fourth quarter of 2021. As compared to the prior year period, performance materials sales in the fourth quarter decreased $378 million, largely driven by lower selling prices, particularly PVC resin, as customer inventory destocking led domestic sales volumes to decline much greater than in-use demand levels. Meanwhile, essential materials sales in the fourth quarter of 2022 increased $279 million over the fourth quarter of 2021, primarily driven by higher average selling prices for caustic soda. As compared to the fourth quarter of 2021, our earnings were impacted by lower integrated margins for all of our products in our performance materials business, especially in global PVC markets, lower production sales volumes for chloroquai and PVC resin, particularly in Europe, higher feedstock, fuel and power costs, and higher turnaround activity. These headwinds were partially offset by higher production and sales volumes for polyethylene and higher sales prices for caustic soda, where the global supply-demand balance tightened as a result of lower global for vinyls operating rates. Penn's segment EBITDA of $443 million in the fourth quarter decreased $118 million from the third quarter of 2022. This sequential decline in EBITDA is a result of lower integrated margins for performance materials, particularly PVC, and lower production sales volumes for polyethylene, chlorine, caustic soda, VCM, and epoxy resins, partially offset by higher sales prices for caustic soda. Turning to our building products business, building and construction markets were particularly impacted by rising interest rates, but housing starts declining by approximately 22% year over year in December. Against this backdrop, HIP segment EBITDA for the fourth quarter of 2022 decreased $29 million to $133 million when compared to the fourth quarter of 2021. Housing product sales decreased $85 million, which reflects the significant destocking I mentioned earlier. Compared to the fourth quarter of 2021, driven by the 22% volume declines across our product offerings. Infrastructure product sales fell 24 million from the fourth quarter of 2021 as a result of broad-based volume declines, particularly in a large diameter PVC pipe. These volume declines were only partially offset by higher prices, both in housing and infrastructure businesses. When compared to the third quarter of 2022, HIP segment EBITDA of $133 million decreased $121 million. Housing product sales of $758 million in the fourth quarter of 2022 decreased $260 million, while infrastructure product sales of $180 million in the fourth quarter of 2022 decreased $47 million from the third quarter of 2022. The lower sales and earnings were the result of lower sales volumes across all lines in our HIP business due to both seasonal trends and slowing U.S. housing construction activity. Now turning to the balance sheeting cash flows, Westlake's cash flow generated reflects our strong continued focus on operational and financial discipline matters. For the full year of 2022, net cash provided by operating activities was a record $3.4 billion, while Capital expenditures were $1.1 billion, resulting in free cash flow of $2.3 billion. In 2022, we retired $250 million in debt, renewed our committed line of credit of $1.5 billion for five years. We closed on $1.4 billion of acquisitions that were fully funded by cash on hand. As of December 31, 2022, cash and cash equivalents were $2.2 billion, and total debt was $4.9 billion, with our net leverage remaining below one turn of EBITDA. We maintain a strong balance sheet with a staggered long-term fixed-rate debt schedule. We will look to strategically deploy our balance sheet for value-creating opportunities as they become available. Turning our attention to 2023, let me address some of our modeling questions and provide some guidance for the year ahead. Based on our current view of demand and prices, we expect 2023 revenue in our HIP segment to be between $4.3 and $4.8 billion with EBITDA margin in the high teens. We expect total capital expenditures to be approximately $1 billion, similar to our depreciation run rate. For 2023, we are prioritizing quick return projects while also allocating appropriate amounts to maintain and operate our facilities safely. This includes a planned turnaround at our Calvert City Ethylene Unit scheduled to begin in May that is projected to last approximately 30 days. For the full year of 2023, we expect our effective tax rate to be approximately 23%. We also expect cash interest expense to be approximately $160 million. Now, let me turn the call back over to Albert to provide a current outlook of our business. Albert?

Thank you, Steve. During the fourth quarter, we saw deteriorating economic conditions that led to inventory stocking, resulting in lower demand for our products and well-supplied markets. Since the end, we have seen modest improvements early in the first quarter in demand for polyethylene and PVC, with improving feedstock and energy costs, providing some margin tailwinds. The large markets of epoxy in Asia and Europe reflect slush demand as China begins its economic recovery and Europe continues to address its own economic and energy challenges. Looking ahead, while uncertainties remain in the macroeconomic outlook, we believe there are some positive trends appearing. Energy costs have improved, particularly in Europe, albeit still at elevated levels. Forecast for U.S. housing starts ranging from 1.1 to 1.3 million units over the next two years, which will be a 20% decline from the 2021-2022 levels. Even with the strength in housing construction that occurred over the past two years, annual new housing construction largely remained below the 50-year average of 1.5 million units. Therefore, we continue to have a deficit from underbuilding that occurred since 2007. As a leading producer of building products, Westlake is well positioned to benefit from the eventual recovery of U.S. new home construction back to a normalized level that supports the strong demographic and household formation trends that are taking place. In the meantime, although new construction growth has recently stored repair and remodeling or R&R spending, which comprises approximately half of our building product sales, is forecasted by industry consultants to continue to grow in 2023. We are cautiously optimistic on the future as there have been some recent positive economic signals. However, inflation and geopolitical tensions continue to weigh on consumer spending and industrial activity. Thus, we remain focused on actions that are within our control to grow shareholder value, including prioritizing quick payback capital projects, progressing our sustainability goals, including continued support for new product innovations such as Green Wing Calcic Soda and PVC, polyethylene one-palette solutions, and PBCO pipe, maintaining our investment-grade credit rating and strong balance sheet, which had $2.2 billion of cash at the end of 2022. Using our strong balance sheet with ample liquidity to look for attractive opportunities to deploy our robust cash generation in a disciplined manner, including returning cash to shareholders through both dividends and share repurchases. and identifying acquisition candidates that can exceed our cost capital while extending the breadth and reach of our portfolio. Given the dynamic economic environment, we will continue to take a business-by-business approach to manage our operations and adjust to market conditions. This begins by maintaining a low cost to serve our customers by operating our plants safely and efficiently reducing overhead costs, and increasing productivity with our automation and digital investments. With this in mind, we're working on a number of initiatives that are expected to deliver an additional $55 to $105 million of annualized savings in 2023. Thank you very much for listening to our fourth quarter earnings call. I will now turn the call back over to Jeff.

Thank you, Albert. Before we begin taking questions, I'd 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'll provide that information again at the end of the call. Justin, we will now take questions.

And thank you. As a reminder to ask a question, please press star 1-1 on your telephone. and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And we please do ask that you limit yourself to one question and one follow-up. Again, we ask that you limit yourself to one question, one follow-up. One moment for our next question. And our next question comes from Alexi Yermoff. from KeyBank Capital Markets. Your line is now open. Great.

Thanks, guys, for taking my question. Good morning. It's Ryan on for Alexi. I guess the first question I would ask you is you talked about the mix in polyethylene and PVC during the quarter with higher exports. Can you maybe talk about what you've seen so far in 1-2 and what you might expect for the rest of the year?

Yeah. Hi, Alexi. This is Roger. Good question. Thank you for that. Certainly, I would say the destocking that we talked about, we felt it pretty hard in polyethylene and PVC both on the domestic market in the U.S. And so we shifted a tremendous amount of our material in Q4 to the export markets in both of those. What we're seeing in Q1 is, I would say, a return to a bit more normal numbers that we would see. So I think through January and February so far, we're seeing a little bit of a rebound on the domestic side, which is allowing us to get back to what I would consider more normal.

And then I guess just as a follow-up, you mentioned the cost-cutting initiatives you guys are looking into for this year. Can you provide some color on what exactly you guys are looking into doing there? Thanks.

Sure. This is Steve. Good morning. You know, as you can see that we've already accomplished in 2022 a meaningful initiative with about $50 million recognized in 22, and we're building on that as we look at 23. And so of that $55 to $105 million that Albert spoke to, about 80% of that relates to improvements in logistics and procurement initiatives, and the other 20% is really additional synergies that we see coming from the opportunities from the acquisitions that we took.

Great. Thanks, guys.

And thank you. And one moment for our next question. And our next question comes from Kevin McCarthy from Vertical Research. Your line is now open.

Good morning. Steve, your cash flow from operations came in a bit higher than we had forecast. So could you comment on your work and capital experience in 2022 and how you would expect working capital to trend in 2023?

Yeah, Kevin, good question. And so as you could see, we continue to see, you know, the the growth in the business and with the elevated pricing that we saw in the first half of 2022 and the latter half of 2022, we continue to collect those higher dollar valued receivables. And of course, as prices continue to decline during the second half of 2022, those were replaced with lower valued dollar receivables. So a strong cash flow year in 2022. As you can see from Roger's comments earlier, we've seen some pickup in demand, and that makes that product shift back to more of a domestic-weighted business where we have better pricing and better margins. I would expect to continue to see a strong and robust cash flow, as you mentioned, that we had in 22. Obviously, as we go forward, we'll see where prices trend, but I still expect that we'll still see strong cash flows in 23 as we march forward.

And then secondly, if I may, in the segment information that you provide, corporate and other is usually an expense. And if I'm reading this quarter correctly, it looks like it swung to a $40 million source of income. Is that correct? And if so, what is driving that swing?

Yeah, Kevin, that is correct. And so we had kind of a non-recurring item that I would characterize. It was a release of a PBC-related reserve. And so it's kind of a non-recurring item. You're right. We typically have a headwind there between $10 and $15 million in the quarter. But this quarter, we certainly had a benefit this quarter.

Thanks very much.

And thank you. And one moment for our next question. And our next question comes from Mike Leathead from Barclays. Your line is now open.

Great. Thanks. Good morning, guys. First question, just on energy prices in Europe. Obviously, they've come down quite a bit the past few months. Have you started to pick back up your utilization rates in Europe, or does it still not make much sense? I guess, can you speak to just the relative economics to maybe supplying Europe from U.S. or other areas versus kind of domestic production as we sit here today?

Yeah, Mike, thanks. It's Roger. Certainly we saw with the extremely high energy prices in Europe, Europe was in a situation where it could not be competitive at all in the world. And so we had production rates down very low late in Q4. I think what we're seeing now with the lower energy rates is we can compete, and we can even do some exports from Europe, which is helping us get the operations back up. I would not say we're back to full speed. But we're significantly better now in Q1 than we were in Q4, I would say. And that's both the epoxy business and the vinyls business that we have there.

Great. That's helpful. And then second, I know you kind of touched on a little bit about some pickup in demand as we started the first quarter. Can you speak to China, I guess, the early days, but just kind of what you've seen coming out of winter, new year there and from the demand standpoint in that region? Sure.

Yeah, this is Albert. Certainly, China's COVID event seems to have gone in China. People are going back to work and people are going to the streets. But the economy is still weak. I think it takes a while for the economy to pick up. And the government is doing a lot to try to stimulate the economy. So we expect sometime in the end of the first quarter, beginning of the second quarter, things will improve a lot more than today.

Great. Thank you. You're welcome.

And thank you. And one moment for our next question. And our next question comes from Josh Spector from UBS. Your line is now open.

Yeah, hi. Thanks for taking my question. I'm just curious with HIPP. Can you talk about, is there a percentage of that segment which has a normal start of year pricing reset that we should be considering in our model?

Yeah, I think most of the pricing reset in HIP and also in PEN pretty much started at the, finished at the end of the year. So maybe some small portion is in the beginning of the year, but mostly it's happened in the 2022 year end. Okay.

I guess maybe digging that a bit more then. So, I mean, pricing was pretty stable sequentially, which was a pretty impressive result. I mean, PVC prices are off maybe 10, 20%. So, is that more of a December comment that's enrolled in early part of this year, or am I just missing it through the noise of other things within the segment? Thanks.

Yeah, Josh, I would say pricing did remain relatively stable in building products. And what we're seeing in the first of the year is, you know, we've seen a penny increase in PBC in January. There's another nine cents of increases announced for the next two months. So I think that future look of where PBC is going is moderating changes in the building products pricing.

Okay. Thank you.

Thank you. And there will be one moment. And one moment for our next question. And our next question comes from David Begleiter from Deutsche Bank. Your line is now open.

Thank you. Good morning. Albert, on polyethylene, you got a $0.03 per pound increase in January. I know there are about $0.06 per pound increase out there for February. What's the potential, you think, for additional polyethylene price increases in February, maybe even March?

Yeah. Polyethylene, there's been a lot of price adjustments, year-end adjustments. So in January, we had a $0.03 price increase offset by non-market adjustments. And I think, depending which consulting you're looking at, in chemical market analytics, CMA, they are looking at additional three cents decrease in May, and that's flat through the year. However, the industry, we have additional three to five cents a pound price announcements in February, and it's trying to recoup some of the price decreases that occurred last year. So time will tell with the strength of China recovering, I think overseas prices are improving. So export prices are improving overseas. There could be some benefit of increasing the prices in February or March.

Very good. And just on caustic, Albert, do you think caustic prices can hold up here in this current environment? Thank you.

Yes, that's a good question. I think, you know, caustic prices has really performed very well in 2022. AND SOME OF THE INDUSTRY CONSULTANTS ARE PROJECTING PRICES TO GRADUALLY COME DOWN THIS YEAR THROUGH THE FIRST HALF INTO THE THIRD QUARTER. SO, AND AS THE PVC DEMAND INCREASES ACROSS THE WORLD, THERE WILL BE MORE PRODUCTION OF CAUSTIC AND MORE SUPPLIER CAUSTIC, SO POSSIBLY CAUSTIC PRICE WILL EASE DURING THE YEAR.

THANK YOU.

YOU'RE WELCOME.

And thank you. And one moment for our next question. And our next question comes from Michael Sison from Wells Fargo. Your line is now open.

Hey, good morning. I think you all mentioned that demand looks a little bit better first quarter for PVC polyethylene. Are your operating rates going to go up sequentially? And given the lower costs that you're seeing, should margins or EBITDA improve as we head into the first quarter from the port directionally?

Yeah, Michael, it's Roger. So certainly I would say we're seeing in Q1, and based on the North American advantage, both PVC and polyethylene can run strong. So I think the demand kick that we're picking up in domestic helps us make our balance, as I say, looking much more of a normal mix between export and domestic. So, yeah, I would say we'll continue to run our plan strong in the first quarter.

Okay. And then for HIP, you gave us a range for sales for 2023. There are some folks who think the second half will be more difficult. Some folks think the first half might be more difficult. Any thoughts on how the to have sort of work out in your HIP outlook, better first, maybe worse second, or just any thoughts there?

Yeah, so Mike and Steve, and so I would say that you see that, you know, we've come down dramatically from the end of the, from over 22 as we saw a lot of, in effect, pullback because of rising rates. And so as you think about where the Federal Reserve is moving with their move on rates, there is an expectation that those rates begin to kind of slow down in terms of the level of increases. And there is a lot of market chatter about that slowing toward the end of this year. And I think if there is a sentiment that rates begin to plateau, that you could see some more positive sentiment come into the market. I would note that the Mortgage Bankers Association has seen a recent increase in applications. And that tells you that consumers are becoming a bit more confident as they look forward that these rate increases will be less aggressive and home prices become more affordable. So there is some probably market view that probably the second half is a more constructive half of the year than the first half of the year.

Thank you. And thank you. And one moment for our next question. And our next question comes from Duffy Fisher from Goldman Sachs. Your line is now open.

Yes, good morning. The first question is just around the epoxy acquisition. You're kind of a year into it now. It's been a tough year. So can you do an after-action review? I mean, does the industry need to have some structural change? Does your business need to have some structural change? Or is this just really, you know, kind of a bad supply-demand setup right now that will fix itself over the next couple years?

Yeah, thanks, Debbie. It's Roger. Maybe a couple comments there. I think, you know, epoxy business for our first year. We started extremely strong. The first part of the year was a very strong part of the business. But as we moved through the year, it certainly got weaker. And by the end of the year, I would say the fourth quarter was really quite weak. I think there's a couple things as we look forward. We have seen China announce already in 23 nearly a doubling of the wind energy installations over 22. So we'll have to watch and see how that plays out, but that should be kind of a nice boost in the markets. As you know, there's a limited number of western players. We'll continue to do what we do, which is make our plants run more efficiently, more cost effective. We'll copy our Westlake model into those sites. So I think there's some self-help work we'll do, but hopefully as well with aviation automotive and some wind energy picking up a little bit in 23, we can get the the 23 looking better than certainly the end of 22. Fair enough.

And then the stat or the projection you threw in there on remodel and repair at 2.6% for the year, one, is you're just talking to your customers, is you're looking at your order book, does that feel like kind of the right number? And then maybe like a follow-up to the last question, if that ends up being the right number, how does that look first half versus second half, do you think?

So Duffy, it's Steve. And I would say that the tone that we saw at the builder's show recently was constructive, and I think it aligns with the tone that we saw from those that visited the builder's show. And certainly there is some expectation that will continue on as we go forward. Typically when housing starts slow, repair and remodeling shows strength. And so there is a typical investment cycle that homeowners always undertake, and that is they're either improving their home either to sell to move forward or improving their home because affordability to move on to a new home is too expensive. So we do think that that aligns with the tone we're hearing from our customers and consistent with the contributions we think it will make to the business over the course of 23. Great.

Thank you, guys. And thank you. And one moment for our next question. And our next question comes from Frank Mitch from Fermium Research. Your line is now open.

Good morning, and thank you. Steve, you mentioned that you have a big turnaround, I believe, in Calvert City in May. And I was wondering if you could provide a little more granularity. Is that pretty much the only major turnaround that you're going to be facing this year? Any sort of color there would be very helpful.

So, Frank, you know, we do have a turnaround starting in May for 30 days. We certainly have turnarounds in many of our other units all throughout the course of the year. You know, because these turnarounds will move from quarter to quarter and change over the course of the year, we've kind of shied away from giving discrete quarter-by-quarter guidance in terms of turnarounds. It will be a slightly busier year in turnaround activity in 23. But I would say that if you look at prior years turnaround activity, it's consistent with the operating rates that we've historically had. But I called out the Calvert City turnaround because it is a turnaround that's going to be 30 days in the length and because it impacts our ethylene units and the entire site accordingly.

Great. Thank you. And, you know, Albert, if I could come back to the comment regarding chlorophyll-I and expecting to see higher volumes as we progress through the year, PBC demand improving, and then therefore, you get more co-product caustic soda. And so therefore, price might be under some pressure. But of course, we're ending the year at a higher level than we began 2022. So I'm just curious how you think about 23 average pricing in your chloracoli business on the essential material side, relative to 22? Do you think that, you know, as we look at the full year, you're looking at something like a flattish sort of environment, or do you think the degradation might be even greater than that?

Well, yes, Frank, that's a good question. One of the industry consultants, as I said earlier, looking at a gradual decline from January through September. But as you said earlier, interesting that in 2022, OUR PRICES START LOW, WENT UP, AND THEN 2023, THE FORECAST IS FROM UP AND GET A BIT LOWER. BUT THE AVERAGE FOR THE WHOLE YEAR, FOR 2023, AS AN ASSOCIATED CONSULTANT, IS NOT THAT TOO MUCH DIFFERENT ON THE AVERAGE OF 2022. AND FOR THAT INFORMATION ALSO, THEY'RE LOOKING AT 2024. OF COURSE, IT'S A CRYSTAL BOING. THE AVERAGE 2024 PRICES It's almost similar, again, to 2023. So people are expecting some kind of flat in price. And the demand globally, as you know, Caustic really follows GDP. As the global economy recovers from COVID and China comes back into more normalized growth, India is still one of the strongest emerging markets, economic growth. We will see demand for Caustic to improve. And the U.S. has the the lowest-cost producer from a low-cost natural gas, low-cost energy, and power, and also we have available salt nearby. So I think U.S. cloaca industries will be able to capitalize on any of the demand increase around the world.

Got you. Thank you so much. You're welcome.

And thank you. And one moment for our next question. And our next question comes from Jeb Zakowskis from JP Morgan. Your line is now open.

Thanks very much. On slide four, you said that you increased your ECUs by 120,000 tons. Where did you do that? And what utilization rate or roughly what utilization rate is it running at?

Yeah, Jeff, thanks. It's Roger. You know, one of the beauties of our footprint is we've got a number of different sites, and so we're able to do low-cost de-bottlenecks in a number of different sites. And so that $120,000 comes from a couple of different projects, mostly across the Gulf Coast. But I would say, in general, for our core alkali assets, we're going to run them strong. So if we're not running them strong, it's because we've had an issue. It's not because we're trying to slow them down.

So this is all up and running and was added in 2022?

Yeah, we completed them in 2022. Okay.

My follow-up, there was a vinyl chloride release in Ohio. Do you think that that has implications for the chlorovinyl industry, or do you think that that will lead to some kind of change, or Or do you have any general comments?

Yeah, I think people are waiting for the Service Transportation Safety Board to come back with a report. I'm sure there will be more government regulation on railroads and possibly on the shippers on safety. These are very important products that ship around the country. So the demand has been satisfied, but definitely we need to increase the safety by the railroads primarily, I would think, on the equipment. Some of them are getting old, and we heard there are new technologies out there to improve the safety aspect of the railroads. Great.

Thank you so much.

You're welcome.

And thank you. And one moment for our next question. And our next question comes from Matthew Skowronski From Credit Suisse, your line is now open.

Good morning. Within your housing infrastructure products margin guide, what are you assuming for raw material costs relative to 4Q levels?

Well, as we think about the margin that you've seen in our HIT business, I think you've been able to see that we've been able to be able to pass those costs through. And so as we see prices rise, and I think Roger made reference to the price nominations we have for PBC in the first quarter, we and our housing businesses have been able to see good price traction. I think you noted from one of the comments and from one of the slides that we were able to hold prices over the quarter. And so while we saw reductions in volume, pricing was actually fairly stable. And so if we see continued pressure on prices coming in on feedstocks, be it PBC or others, we'll obviously look to see what we can do to manage that. But if we have to, we'll pass those through.

Understood. Thank you, Steve. With regard to M&A, would you consider moving outside of current market verticals you already participate in?

I think you've seen that where we see adjacencies, and I would use a posse of that. I would use some of our acquisition experiences in 21, like Boral, where we saw some adjacencies that make good sense. They provide synergies to us and provide an opportunity to extend the integration model that we have, whether it's a sales integration approach that we've taken with our Boral business or whether it is a materials integration strategy that we have. They're epoxy acquisitions. So the answer is, as long as we see good synergy and good value, we'll look at adjacencies to our existing businesses. Thank you.

You're welcome. And thank you. And one moment for our next question. And our next question comes from Angel Castillo from Morgan Stanley. Your line is now open.

Hi, thanks for taking my question. Just wanted to maybe flip the exports question on its head a little bit. And as you think about a shift to more domestic, I think one of the areas that had kind of pressured the industry both kind of in vinyl but also in areas like epoxy was this idea that I guess the exports were seeing a greater degree of pressure from other regions exporting products. What are you seeing in that? I guess, competitive environment? Are you still seeing products come from Asia, or are you seeing some of that start to stay domestically more? And as you raise operating rates, how do you see that kind of evolving in terms of the impact on the export market?

Yeah, thanks. It's Roger again. I think what we've seen on the export markets for both polyethylene and PVC is a bump up in pricing around the world. So PVC is up by more than a dime a pound on the export side. And so that's helping us. I would say we're still, as Albert mentioned, a little watch and see on China's recovery. But India's come out quite strong and has really been, I would say, supporting a lot of the markets heading that direction. So we're seeing improved pricing on exports. And at the same time, that helps a little bit on the, you know, impacts a little bit the pricing in the domestic market as well. But so we'll, as I mentioned earlier, our U.S. assets have a cost advantage on raw materials, and we plan to run them.

Thank you. And then you used to give a sensitivity to natural gas prices. Could you just remind us what that is at today, particularly given the rate of volatility of our operating rates and whether the lower cost should flow through on a relatively immediate basis or if there's a little bit of a lag. I don't know if there's any factors to consider there.

Yeah, and so the sensitivities that we've provided are still appropriate here. When you think of natural gas in our markets, a dollar in MMBTU is about $106 million of EBITDA impact. And certainly when we think of in our European business, you know, a 10-euro-thousand KWH is about 10 million-euro impact.

And that normally should flow quite quickly. Right. Got it. Thank you.

And thank you. And one moment for our next question. And our next question comes from Eric Petrie from Citi. Your line is now open.

Hi, good morning, Albert and Steve. Good morning. Just going back to the exports, you know, we saw a lot of competitive pressures from China exporting more caustic soda, more PVC. I think PVC prices in China right now are around $0.40, closer to $0.90 here in the U.S. domestic market. So what are your expectations in 2023 for And what have you seen here today out of China?

Yes, as China's economy improves, then China's industry won't have to export low prices. And by the way, I think the PVC price you quoted in the U.S. is a list price, not an actual price. So certainly the U.S. can compete with any PVC producer around the world. And as Roger said, that the industry is able to export and we're going forward still until the U.S. housing market returns, export will be a big part of the U.S. PVC producers. And China, they have a very high energy cost and even coal, some of the PVC are produced from coal-based technology, but the coal prices are also very high. I think China, they were exporting some quantities just to keep the plants running, but as local demand improves, they will be exporting less.

Thank you, Albert. And then maybe a question for Roger on your comment of the doubling of wind installations in China. What does that do to kind of supply-demand balances in the country? And then, you know, how much capacity is China adding, you know, this year and kind of what needs to be absorbed from last year?

Yeah, so I think wind in China is a big driver of the wind market. And so they've got RFQs out that say about double this year what they've done last year. That's a good first step, I think, in really starting to absorb the extra capacity that's come in, as well as avoid the exports, right? So as Albert mentioned, with the China domestic market so slow, the China producers are exporting a significant amount. I think that will turn back inside and be used in China as opposed to hitting the export markets.

Thank you.

And thank you. And one moment for our next question. And if you would like to ask a question, that is star 1-1. Again, that's star 1-1. And one moment for our next question. And our next question comes from Arun Rizwanathan. He's a Line is now open.

Great, thanks for taking my question.

Just curious, you know, you made the comment about poise well, and new construction does return. How much of your business really is tied to new construction now? I know within building products you have some more exposure to repair and remodeling, but it's kind of muddied just because there is so many other overlapping factors. So how much of your business would you say is or outdoor sales or EBITDAs may be tied to new construction. Thanks.

Our building materials business, about 50% is targeted to the new construction market and 50% to the repair and remodeling market. And as you heard earlier, Steve mentioned about the new home construction forecast to be going from 1.5 million units last year to about between 1.1 and 1.3 million units this year and next year. That's the forecast. And that's about a 20% drop. And repair and modeling, as Steve also mentioned, the LIRA index, they are looking at a modest growth this year. So, you know, if it's 50-50 weighting, then a 20% drop in new construction, modest growth in repair and modeling, we foresee potentially a 10% reduction in volume compared to last year.

So that's kind of order of magnitude estimates impact.

Great.

Thanks, Albert. And what about PEM? I mean, there is the PVC resin production, but that's potentially offset by some of your infrastructure exposure there. How would you characterize the new construction exposure within PEM?

Yeah, so it's Roger again. I mean, I think, you know, we do have certainly some pull-through on the PIM side through the housing materials construction piece. The second piece we have there that I would say it's still early on is the impact on the infrastructure part of HIP from the infrastructure, the IRA, because we expect still that there will be, you know, significant investments in water systems throughout the U.S., and so we're still at the early stages of starting to see that through. So I think those two pieces will continue to pull PVC through. An exact number, I don't have an exact number in PIM on new construction. Think about that.

Okay. This is Albert. As what I said earlier, the industry, whatever they cannot supply to the domestic market, they will export.

Okay, I got it. And then just as a quick follow-up, you said $1.2 billion closed acquisitions in 2022. Would you expect a similar amount in 23? You know, or what are your kind of preferences for cashing at this point?

So, Arun, I was chuckling. You know, the answer is we're, you know, we look for value-added opportunities. And so it's hard to know exactly whether there'll be an opportunity to transact in any particular year. But we'll always look for opportunities that are going to be value-added. And so you're right, over the last couple of years, it's been a very busy period of time. to really add businesses to the overall portfolio, but those were all businesses that we thought were really great additions to the portfolio that we had compelling synergies, as you can see from the numbers we've talked about earlier. So there's going to be an ongoing process, as there always has been, to look for opportunities, but it's hard to know whether those will play out and materialize in 23. Great, thanks. You're welcome.

And thank you. And at this time, the Q&A session has ended. Are there any closing remarks?

Yes. Thank you again for participating in today's call. We hope you'll join us again for our next conference call to discuss our first quarter 2023 results. Thank you.

Thank you for participating in today's Westlake Corporation fourth quarter and full year earnings conference call. As a reminder, this call will be available for replay beginning two hours after the call has ended. The replay can be accessed via Westlake