Westlake Corporation

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Westlake Corporation First Quarter 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. After the speaker's remarks, you will be invited to participate in a question and answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, May 4, 2023. I would now like to turn the call over to your host today, Jeff Hawley, Westlake's Vice President and Treasurer, sir, you may begin.

Thank you. Good morning, everyone, and welcome to the Westlake Corporation conference call to discuss our first quarter 2023 results. I'm joined today by Albert Chow, our President and CEO, Steve Bender, our Executive Vice President and Chief Financial Officer, and other members of our management team. During the call, we will refer to our two reporting segments, performance and essential materials, or 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 will 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, 2022 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 first quarter 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, May 4th, 2023, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay. Finally, I would advise you that this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at westlake.com. Now, I 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 first quarter 2023 results. For the first quarter of 2023, we achieved sales of $3.4 billion, net income of $394 million, and EBITDA of $825 million. These solid results reflect significant improvement in volumes, margins, and earnings from the fourth quarter of 2022 as customer destocking activity moderated and market demand improved, and we benefited from lower feedstock, fuel, and power costs. As demand improved in the first quarter, we shifted sales volumes from exports to domestic markets, contributing to better sales mix and higher integrated margins. We also benefited from lower fee stock energy costs compared to the levels of 2022, as our globally advantaged low-cost fee stock and energy position in the U.S. Gulf Coast improved further. But we also saw lower energy costs in Europe as well, Our results for the first quarter also reflected the achievement of approximately $25 million of cost savings in a quarter towards our previously communicated $55 to $105 million of targeted 2023 cost savings. Each of these factors supported solid improvement in our integrated margins on the fourth quarter of 2022. Looking at our first quarter financial results, I'm particularly proud of our HIP segment performance, which maintained an EBITDA margin of 20%, similar to the first quarter of 2022. These margins were achieved despite a 21% decline in volume when compared to the prior year period, which was driven by the decline in home building activity due to lower affordability from higher mortgage rates. This demonstrates the benefit of our product mix and strengths of our brands. The margin stability of these businesses, along with the long-term growth opportunity in the U.S. housing market, were key reasons why we invested in the HIP segment in 2021 through the acquisitions of Borough Building Products, Lasco Fittings, and Dymax. We continue to have a positive long-term view of the U.S. housing market driven by the deficit in new housing construction since the Great Recession in 2008 and increasing demographic demand. Turning to our PAMS segment, we continue to operate with agility as we navigated the current market dynamics by shifting PPC and polyethylene sales volume back from export markets to rebounding domestic markets. While solid chlorophyllite markets drove higher average selling prices for both chlorine and caustic soda in North America. Lower feedstock energy prices combined with our cost reduction actions drove significant improvement in integrated margins from the fourth quarter of 2022. Overall, I'm very pleased with our first quarter performance and the team's ability to successfully adjust to rapidly changing end market trends. I would now like to turn our co-orbiter, Steve, to provide more detail on our financial results for the first quarter 2023.