Westlake Corporation

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation third quarter 2024 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 the question and answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, November 5th, 2024. I would now like to turn the call over to today's host, John Zeller, Westlake's Vice President and Treasurer. Sir, you may begin.

Thank you. Good morning, everyone, and welcome to the Westlake Corporation conference call to discuss our third quarter 2024 results. I am joined today by Albert Chow, our Executive Chairman, John Mark Gilson, our President and CEO, Steve Bender, our Executive Vice President and Chief Financial Officer, and other members of our management team. During the call, we will refer to our two reporting segments, 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 Jean-Marc, who will open with a few comments regarding Westlake's performance. Steve will then discuss our financial and operating results. After which, Jean-Marc will add a few concluding comments, and we will open the call up to questions. During the third quarter of 2024, We accrued $75 million of after-tax expenses in the performance and essential materials segment related to the previously announced decision to mothball two units within our European epoxy business to reduce our costs and allow our manufacturing footprint to align with changing global conditions. We refer to this charge as the identified item 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 item. As such, comments made on this call will be in regard to our underlying business results using non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to GAAP financial measures is provided in our earnings release, which is available in the investor relations section of our website. Today, management is going to discuss certain topics that will contain forward-looking information that is based on management's beliefs, as well as assumptions made by and information currently available to management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. These risks and uncertainties are discussed in Westlake's Form 10-K for the year ended December 31, 2023 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 third 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, November 5th, 2024, and therefore you are advised that time sense of information may no longer be accurate as of the time of any replay. Finally, I would advise you that this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at westlake.com. Now I'd like to turn the call over to Jean-Marc Gilson. Jean-Marc?

Thank you, John, and good morning, everyone. We appreciate you joining us to discuss our third quarter 2024 results. Global macroeconomic conditions in the third quarter were similar to those we saw in the second quarter, with relative strength in North America and a slow recovery in Asia and Europe, where activity levels remain muted. Demand for materials in our PEM segment generally mirror these trends during the third quarter, with revenue comparable to the second quarter on relatively flat sales volume. Third quarter EBITDA in our PEM segment would have been similar to the second quarter, if not for the 75 million mothball expense and extended maintenance outages at two facilities. The combined financial impact of these two outages was $120 million, which drove the sequential decline in our EBITDA from the second quarter. Importantly, the necessary repairs have now been completed and each plant returned to service last month. And we are applying the lessons learned from these incidents to other facilities to improve the reliability of our plants. For the third quarter of 2024, we reported net sales of 3.1 billion, EBITDA of $580 million, and net income of $183 million, or $1.41 per share. Compared to our second quarter results, we benefited from higher caustic soda and polyethylene prices, However, our hip sales volume was impacted by weather events. EBITDA margin of 19% in the third quarter was below the 23% we report in the second quarter of 2024, due primarily to the two extended maintenance outages. Our highly integrated manufacturing footprint in North America combined with our large pvc offtake into our hip segments building products serving the residential housing and remodeling markets has continued to be a strategically advantaged benefit the significant under supply of residential housing over the past 15 years and The growth in population over the same time period has created the housing shortage we see in the North American market, with US housing starts in the third quarter averaging 1.3 million, similar to the second quarter. We believe the pent-up demand for residential housing will drive future construction activity as expected interest rate reduction unfold into 2025. Despite the disruption to sales volume from two hurricanes that made landfall in the southeastern portion of the U.S., our HIP segment sales and margins continue to perform well as a result of our broad product portfolio with strong brands that make us a supplier of choice for many of the fastest growing large home builders. Our concentrated footprint in North America continues to provide globally advantaged energy and feedstock, letting us capture demand and growth we see in the Americas while we continue to experience a slow economic recovery and growth in demand across international and markets. A global scale with market leading positions combined with our cost advantage footprint has positioned our PEM segment to serve our diverse markets, such as needs for housing, clean water, food packaging, electrification, and other growing markets. Our energy and feedstock advantage, combined with our integrated manufacturing footprint, true to building products, positions us well to drive growth in our HIP segment as we continue to partner with home builders to address the significant housing shortage in North America. We have a very broad product offering in our HIP segment, that serves the residential housing market with innovative building products, pipe and fittings, and PVC compounds for building and construction products. Meanwhile, our investment-grade balance sheet with $2.9 billion of cash and cash equivalent is a source of strength and a driver of earning growth as we continue to seek ways to redeploy it to create long-term value for shareholders i would like now to turn our call over to steve to provide more detail on our financial results for the third quarter steve thank you john mark and good morning everyone westlake reported