Westlake Corporation

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Wesley Corporation fourth quarter and full year 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, February 20th, 2024. I would now like to turn the call over to today's host, Jeff Hawley, Westlake's Vice President and Treasurer. Sir, you may begin.

Thank you, Jonathan. Good morning, everyone, and welcome to the Westlake Corporation Conference Call to discuss our fourth quarter and full year results for 2023. 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, 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 to questions. During the fourth quarter of 2023, we recorded a non-cash impairment charge of $475 million related to the company's epoxy business, as well as a $150 million charge to fully resolve certain liability claims that are currently not being covered by certain of our excess insurance carriers. We refer to these two charges as identified items in our earnings release and on this conference call. References to income from operations, EBITDA, net income, and earnings per share on this call exclude the financial impact of the identified items. As such, comments made on this call will be in regard to our underlying business results using these non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to GAAP financial measures is provided in our earnings release, which is available in the investor relations section of our website. Today, management is going to discuss certain topics that will contain forward-looking information that is based on management's beliefs as well as assumptions made by and information currently available to management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. These risks and uncertainties are discussed in Westlake's 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 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 20, 2024, 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 Schoen.

Albert? Thank you, Jeff. Good morning, everyone. We appreciate you joining us to discuss our fourth quarter and full year 2023 results. Exclusively, the identified items For the fourth quarter of 2023, we reported debt income of $93 million, or $0.72 per share, and EBITDA of $390 million on sales of $2.8 billion. While overall sales revenue was below the year-ago period due to lower average sales prices in the PEM segment, we are pleased that our fourth quarter total sales volume increased 7% compared to the fourth quarter of 2022, with North American demand strengths partly offset by lower sales volumes in our international operations. Regionally, our volume and price declines 2023 were most impacted in our European operations, which were pressured by a weak macroeconomic backdrop and imports into Europe from Asia. The volume and price declines were most felt in our base epoxy business, driven by the very weak economic environment in Europe and China, along with significant new global epoxy capacity additions. These capacity additions, which were primarily in China, were met with weak regional demand driving a significant increase in Asian exports to Europe and other regions. These Asian export volumes were aggressively priced as some Asian competitors received energy subsidies to stimulate exports at a time when European energy costs were still relatively high, in part due to the ongoing war in Ukraine. As a result of these factors, our European-based epoxy resin business experienced a sharp and sudden decline in profitability. To reflect these market changes, along with our current outlook for global operating rates to remain under pressure, we recorded a non-cash impairment charge in our base epoxy business in the Netherlands in the fourth quarter. We have begun to implement actions to reduce our costs and improve the profitability of our European businesses. The cost savings we're expecting across our company-wide cost reduction programs are $125 to $150 million in 2024, after achieving 2023 cost savings of $110 million. Before turning the call over to Steve to review our financial results in more detail, I want to take a few minutes to review our accomplishments in 2023. Our HIP segment achieved record income from operations of $710 million and a record EBITDA margin of 23% as we further integrated and achieved synergies from the Borough, LASCO, and Dimex acquisitions. We are very pleased with the evolution of this segment, which produced back-to-back record results over the past two years, even with the economic challenges in the residential building market. These record results provided stability to our overall earnings in 2023 with an asset-light, cash-generative business model with leading positions in North America. Our constant focus on cash flow generation enabled Westlake to generate $2.3 billion of cash from operations and $1.3 billion of free cash flow after investing over $1 billion to maintain and improve our plants and equipment. The solid cash flow generation, strength of our business, and confidence in the company's future allowed us to return approximately $250 million to shareholders in 2023, including an increase of our quarterly dividends by 40% to $0.50 per share, which demonstrates our commitment to rewarding shareholders. We finished the year with a solid investment grade rated balance sheet, highlighted by $3.3 billion of cash and equivalents, providing flexibility to pursue opportunities as they present themselves. Finally, in conjunction with the publication of our sixth annual sustainability report in October, we added five additional sustainability goals to our existing CO2 emissions intensity reduction target. These five new goals address water usage, health and safety, community engagement, diversity and inclusion, and the circular economy, and are an important part of our overall approach towards stewardship of our environment and communities. Taken together, I'm very proud of our 2023 accomplishments, given the challenging global economic environment. And I'd like to thank our nearly 16,000 team members for their hard work and dedication that enabled these achievements and the record HIP results. I would now like to turn the call over to Steve to provide more detail on our financial results for the fourth quarter and the full year of 2023.