Q1 2021 Westlake Chemical Corp Earnings Call
Good morning, ladies and gentlemen, thank you for standing by and welcome to the Westlake Chemical Corporation first quarter 2021 earnings conference call.
During the presentation, all participants will be in a listen only mode.
After the Speakers' remarks, you will be invited to participate in a question and answer session.
Absolutely Minder, ladies and gentlemen, this conference is being recorded today may four 2021.
I would now like to turn the call over to Gary to today's host, Jeff Holly Westlake, Vice President and Treasurer, Sir you may begin.
Thank you Daphne and good morning, everyone and welcome to the Westlake Chemical Corporation first quarter 2021 conference call.
I'm joined today by Albert Chao, our President and CEO, Steve Bender, Our executive Vice President and Chief Financial Officer, and other members of our management team.
The conference call agenda will begin with Albert who will open with a few comments regarding Westlake performance and our current perspective on the industry. Steve will then provide a more detailed book at our financial and operating results. Finally, Albert will add a few concluding comments and we will then open the call up to questions.
During this call we refer to ourselves as Westlake chemical.
Any reference to Westlake partners is to our Master limited partnership Westlake Chemical partners L. P.
And similar references to Opco refer to our subsidiary Westlake Chemical Opco LP, which owns certain olefins facilities.
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.
Actual results could differ materially based on many factors, including the cyclical nature of the industries in which we compete availability cost and volatility of raw materials energy and utilities governmental regulatory actions changes in trade policy and political unrest global economic conditions, including the impact of the <unk>.
Corona virus industry operating rates impacts of extreme weather events, the supply demand balance for Westlake products competitive products and pricing pressures access to capital markets technological developments and other risk factors as discussed in our SEC filings.
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 webpage at Westlake Dotcom.
We have also posted a presentation on our website to review the first quarter.
A replay of today's call will be available beginning today two hours following the conclusion of this call.
This replay may be accessed by dialing the following numbers domestic callers should dial 850 58592056.
International callers may access the replay at 4045373406, the access code for both numbers is 467 7649.
Please note that information reported on this call speaks only as of today may four 2021, and therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay.
I would finally advise you that todays conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at Westlake Dot 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 2021 results.
In this morning's press release, we reported a strong start to the year despite.
Despite the impacts on the severe winter storm with.
With net income for the first quarter of 2021.
$242 million.
Or $1.87 per share.
Our operating income increased 154% in the first quarter of 2021 gross.
This is the first quarter of 2020.
Which was before before the impacts of the pandemic.
Before Steve goes through the financial results.
Let me provide some insight into the quarter.
The first quarter of 2020, one saw strong pricing for many of our products driven by robust global demand.
The strength in demand for polyethylene and PVC, resulting from the global economic rebound in 2020.
Well, it's driven by an increase in worldwide packaging consumption.
And constructing construction activities.
The 30% year over year increase in U S housing permits and associated housing starts.
Shows the strength in residential construction activity that benefited our downstream building products business.
In our vinyls segment was tight inventory conditions strong demand for vinyls and production outages caused by the severe winter storm.
We saw a PVC resin prices steadily increased in the first quarter.
The polyethylene industry also experienced tight inventory conditions.
Due to the strong global packaging demand <unk>.
And domestic production outages caused by the severe winter storm.
These conditions drove price pricing and integrated margins in our olefins segment.
I wanted to take this opportunity to thank our employees for the efforts quickly responding to the disruptions caused by the severe winter storm.
And fully resuming operations by the end of the first quarter.
I would now like to turn our call over to Steve to provide more detail on our financial and operating results for the first quarter.
Operating and good morning, everyone I will start with discussing our consolidated financial results and then go into a more detailed review of our vinyls and olefins segment results.
Westlake continue to benefit from the strong global supply demand dynamics and a robust return of global economic activity driving demand from most of our products for the first quarter of 2021, we reported net income of $242 million.
Or $1 87 per share compared to net income of $145 million for the first quarter of 2020, which included a $62 million tax benefit from the cares Act.
These results are inclusive of the previously mentioned severe winter storm impact of approximately $100 million or <unk> 61 per share in the first quarter.
The $97 million first quarter year over year increase net income as a result from higher sales prices and integrated margins from polyethylene and PVC and higher earnings resulting from the strong demand on our downstream building products business.
Partially offsetting these increases were lost sales and lower production volumes.
Weighted maintenance cost higher feedstock and natural gas fuel cost all related to the severe winter storm as well as lower sales prices for caustic soda.
While we will work quickly to get our facilities back online our estimates for a loss margin from sales and repair expense.
Proximately $120 million, we incurred approximately $100 million on the first quarter of 2021 results or approximately <unk> 61 per share with the remaining $20 million falling into the second quarter.
Of this estimated first quarter impact of $100 million approximately 75% was related to our vinyls segment with a balance of banking our olefins segment.
First quarter 2021, net income increased by $129 million from fourth quarter 2020, net income of $113 million.
Increased net income was largely attributable to higher sales prices for polyethylene and PVC resin.
Offsetting these benefits were lower caustic soda prices and higher feedstock and fuel cost.
Our utilization of the FIFO method of accounting resulted in a favorable pre tax impact of approximately $55 million or a <unk> 33 per share compared to what earnings would have been reported under the LIFO method. This is only an estimate and has not been audited.
Now, let's move on to discuss the performance of our two segments, starting with our vinyls segment.
Throughout the first quarter, we experienced robust global demand for PVC anchored by strong global construction activity.
Our downstream building products business continued to benefit from solid residential construction and repair and remodeling demand.
PVC strength was driven by broad based end market demand, including residential construction automotive and medical equipment.
While the severe winter storm impacted our production in the quarter the strong demand for PVC and our downstream building products saw higher sales prices and we benefited from strong integrated margins during the quarter.
For the first quarter of 2021, vinyls operating income of $200 million increased $127 million from the prior year period, primarily as a result of higher sales prices and margins for PVC resin and.
And higher sales prices and margins in our downstream building products business.
This was partially offset by reduced sales volumes and lost production from the severe winter storm lower sales price of caustic soda and higher feedstock and fuel cost.
For the first quarter of 2021 Vinyls operating income increased $34 million from fourth quarter of 2020, primarily as a result from higher sales.
For PVC resin and higher volumes in our downstream building products business.
In our olefins business robust global demand for packaging and other consumer products expanded our integrated margins and polyethylene.
Our first quarter 2021, operating income of $180 million increased $118 million from the first quarter of 2020, driven by strong pricing and improved demand offset by lower sales volumes, resulting from the severe winter storm.
For the first quarter 2021, olefins operating income increased $158 million from fourth quarter of 2020 Premier primarily due to higher sales prices and margins as well as increased sales volumes, partially offset by higher feedstock and fuel cost.
Next let's turn our attention to the balance sheet and statement of cash flows.
We generated $265 million from cash flows from operations in the first quarter 2021, resulting in total cash and cash equivalents of $1, one 4 billion.
First quarter 2021 capital expenditures were $141 million.
We maintain a long dated.
Debt maturity profile with a weighted average debt maturity of 14 years anchoring our investment grade balance sheet.
Now to address some of your modeling questions.
We expect our effective tax rate for the full year of 2021 to be approximately 23% and our cash tax rate of approximately 19%.
As we stated in our last call we forecast our capital expenditures for the year to be between 700 $800 million.
We are planning for a turnaround of our Petro two ethylene unit to begin in September of this year. This turnaround and associated outage is expected to last approximately 60 days.
With that I'll now turn the call back over to Albert to make some closing comments Albert.
Thank you Steve.
As we look ahead, we see continuing strength in global demand in polyethylene PVC and downstream building products driven by the solid market in residential construction packaging automotive and health care.
Our high level of integration extends through the value chain from natural gas liquids and other feedstocks through to consumer beauty products on <unk>.
Chemical operations sit on the lower end of the global cost curve.
Which enable us to drive long term value throughout the business and investment cycles.
While meeting the needs of our end use customers with a downstream building products business.
Additional value.
In our vinyls segment, we see continuing strength in the PVC and downstream building products markets driven by strong construction and other durable goods demand.
In our olefins business and used demand remained strong as seen essential everyday products, such as consumer packaging and health care on driving polyethylene demand.
With a continued emphasis on corporate stewardship, we remain vigilant with our focus in developing products and solutions for a more suitable sustainable future.
While protecting and investing in our people.
As an example of our commitment to sustainability.
We have introduced green caustic soda.
Certified climate friendly caustic soda utilizing renewable energy.
This product is available under the brand name Green Bean, which has a reduced C O two impact of more than 30% compared to conventional caustic soda.
We look forward to further discussing these projects with you as more developments on made.
And furthering our commitment to Jonesboro Nancy.
Through our future ESG reporting.
These initiatives reflect our dedication to being in dominantly.
And socially responsible corporate citizen.
Let's take remains focused on our core tenants.
Only to protect the health and safety of employees deliver on our commitments to our customers.
And the strength and the accompanying OS six <unk>.
And could buy these values, we are confident that Westlake is well positioned to serve the growing worldwide needs from our customers, while maintaining financial discipline.
Which combined with a strong fundamentals on our business enable us to deliver long term value to our shareholders.
Thank you very much for listening to our first quarter earnings call.
Now I'll turn the call back over to Jeff.
Albert before we begin taking questions I would like to remind you that a replay of this teleconference will be available two hours. After the call has ended.
Will provide that number again at the end of the call Daphne we will now take questions.
Thank you.
At this time.
To ask a question you will need to press Star then the number one on your telephone.
To withdraw your question press the pound key.
Please standby, while we compile the Q&A roster.
Your first question comes from the line of Ryan This one Nathan with RBC capital markets.
And your life.
Good morning, Arun are you there.
Rooney you on the line.
Operator, I think we'll just need to go to the next question on put it rune back on the queue.
Your next question comes from the line of Alex.
Yes from Mam malls with Keybanc.
Thank you.
Morning, everyone.
Youre all of them from volumes were down nine 4% year over year in the first quarter.
Do you think you could get to flat or up year over year volumes in the remainder of the year or maybe as soon as second quarter.
Certainly as a result of the storms that we saw we certainly declared force majeure on many of our products and so with that impact on production and impact on sales I do expect that we'll be able to resume more normal operations, having brought the units back on before the end of the first quarter as we entered in.
The second quarter and benefit from the very strong demands we are seeing in both our olefins and vinyls segment.
<unk>.
Thank you.
Follow up on PVC, the prices have been rising pretty steadily in the last few months. How do you think about sustainability do you see from a crisis overshooting and then coming back some in the next few months or do you see a plateau.
Yes, we see that.
PVC price remained to be very strong and actually the export price.
It's higher than our domestic sales price. So we believe that especially well in the second and third quarter, which are the strong quarters for construction.
Man is very strong and.
So we believe that price momentum will still be there.
Thank you Albert and Steve.
I'll come on.
Your next question comes from the line of David Magee.
<unk> Deutsche.
Deutsche Bank.
Thank you good morning, good morning, David Good morning.
Albert if you can talk about polyethylene pricing what you may realize.
And your thoughts on that May price increase that's currently out there.
Suddenly I think.
All the.
Trade journals reporting debt seven increase in April is effective.
And people are looking at potentially.
I know the three.
From a price increase in may.
Time will tell.
So, but the demand for polyethylene is still very strong inventories among producers and customers are still very low.
And I think the export price I'll still higher.
Circumstances than a domestic large customers.
Very good and Steve you talked about your Capex. This year what are the growth projects Youre looking at for this year and maybe from even for next year.
So David on the Capex. This year is the guidance is $7 million to $800 million and so a big portion of that is really kind of ongoing activities related to maintenance.
Maintenance and some expansion opportunities nothing that we've announced publicly but we'll continue to look at some of our Gulf Coast based VI.
On the vinyl opportunities and see if we can expand some of those facilities along the Gulf Coast of course, we have major a major turnaround as I mentioned in my prepared remarks for one of the ethylene units starting in September so that will also be.
Our use of cash over the course of the year.
Thank you.
Youre welcome.
Your next question comes from the lineup.
Corey with Goldman Sachs.
Thank you very much good morning.
Good morning, with the balance sheet and obviously you're on.
On a real nice spot for both remained businesses.
But I would guess maybe valuations in the space.
Well I don't know I guess I'm asking.
How do you feel about inorganic opportunity in this environment, where you've got quite a bit of firepower to use.
So Bob we certainly have always had a very active dialogue with them.
Firms had have opportunities in the space, whether they're divisions, our individual plants our businesses.
So we always look at kind of long term value proposition that come forth and so whether it's times, where there is <unk>.
Attractive pricing or more frothy pricing, we tend to take a more pragmatic longer term view and look at a cycle average in terms of the value proposition.
And certainly our focus has been that way and continues to be that way. So we'll continue to look for opportunities to grow the business both organically through expansion, but also through acquisition and make a a.
Kind of a thoughtful look over a cycle average valuation to make sure that it's got the return potential that we think that it should.
And Albert you mentioned, the Green caustic soda.
Curious as debt.
In effort to credential is your own ESG.
Ambitions or is it something where you can charge a higher price for that product.
I wanted to do both of course.
Very well thank you Youre welcome. Thank you.
Your next question comes from the line of Kevin Mccarthy with Baird.
Sorry, Rick.
Research.
Good morning would you comment on the trends Youre seeing in the downstream building products business and specifically are you able to increase prices and margins in that business relative to the strength and PVC resin.
So Kevin is it has been as we noted a strong demand in building materials and so certainly in.
On the position that we've that we hold a large position in exterior products such as siding trim pipe.
Fittings, and PVC compounds and so we've seen strength across that space certainly as we see increases in resin we attempt to pass those through downstream.
That we can continue to see growth in value and so over the course of.
Over the course of this quarter, we have seen an increase in value proposition as we pass that through.
Okay, and then secondly, Albert you mentioned the strength of export prices as it relates to the PVC market.
Can you talk a little bit about how you see international trade dynamics developing moving forward.
We sometimes look at India as an important market and sadly India's I think dislocated right now due to the severity of the COVID-19 situation. So how do you see export pricing evolving and also export volumes as the U S industry rates continue to recover from Yuri.
Suddenly you.
I think the largest export PVC around the world.
Because of our strength.
In feedstock daily.
Daily ability and competitive peak selling ethane empower produce chlor alkali and big.
Sustained the caustic market.
And as you may know that very little new capacity being added last two years embedded on capacity.
Announced around the world for new PVC capacity. So the rest of world are relying on the U S.
To provide export PVC tube Sudan to meet demand and as I said, India is a Big example, I think they are one of the largest importing country PVC in the world.
And.
The day Bank continues to grow and many government sales stimulating.
Construction provide affordable housing to its people in PBC is one of the best products.
Exterior and interior of houses so.
We expect demand continue to grow and with adult capacity added one of the world I think put on long term.
The <unk>.
Business, the vinyl and construction business should be quite good going forward.
Thank you.
Youre welcome.
Next is Angel Christian now with Morgan Stanley.
Hey, good morning. Thanks.
Thanks for taking my question just wanted to expand a little bit more on Albert I think you talked about inventory conditions in both <unk> and PVC.
I was wondering if you could talk about.
Where do you kind of see gross profit versus history, and how long do you think that will take to kind of normalize.
Through the year.
Sure.
Well.
So Steve.
On a discussion earlier is that I think the huge run book.
Rhem, putting prices not only close the demand, but also because of the severe winter storm this year than last year with Hurricanes and also waste there is outages and sort of market is very tight and manufacturing of auto plants are running as much as day can to meet the customer demand globally and U S industry has curtailed ex.
To help the domestic to meet domestic demand.
But if you look at.
The.
The consultants journals theyre projecting on the after all.
Multiple double digits increases our prices last year and this year the.
Since June of last year, almost every month.
Price increase and it must be a slowdown in price increase or decrease.
It could happen.
The spot ethylene was as high as over 60 odd cents per pound in the U S and as we speak has come down to <unk>. So that will help reduce some of the pressures.
For polymer manufacturers, but I think the fundamental demand is it earlier, the second and third quarter.
Historically on the two strongest quarter of the year on.
Full volume in full pricing.
And we foresee this year will be similar from defense.
That's very helpful. Thank you and Steve I was hoping you could.
Give us a little bit more color on the corporate line that looked to be a little bit longer this quarter. So curious if there's if you could break that up price.
I'm sorry, you broke up as Youre asking your question can you repeat that again.
Yes, sorry about that on the.
Corporate line I was hoping you could give us a little bit more detail.
It was $30 million this quarter, so a little bit.
On a larger than previous quarter, so curious what drove that.
Yeah, a lot of that is really just kind of intercompany eliminations that youll see that go on as a result of ex <unk>.
Exchanging.
Ethylene between the two segments.
That's helpful. Thank you.
Okay.
Your next question comes from the line of Mike <unk> with Wells Fargo.
Hey, good morning, guys.
Good morning EBIT.
Your EBITDA margins in Q1 for Alison 40%.
Pretty impressive when I look back to history 2014 to 17 were similar.
Similar or at those high levels. So just curious if if you think now this is a level that can be sustained.
Obviously, not every quarter, but on average for for the year on maybe beyond 2021.
And could this be a good string of good profitability for that segment for the next couple of years.
Actually you know that we on a net buyer of <unk>.
Well by over 1 billion pounds of ethylene per year, so actually low ethylene prices is better for us.
So on the product prices.
Separate from the feedstock.
And hence we pulled on our earnings was impacted by higher feedstock and fuel prices last quarter.
2018 was.
The high of the.
Historical highest EBITDA for Westlake and at that time oil prices were still I think about it in the $60 a barrel.
Today, we're talking about the similar.
On brand and.
<unk> into $60 a range. So I think that's a.
A reasonable price globally for crude oil and then if demand keeps on improving with vaccination.
Process, improving around the world and with all the stimulus debt only the U S or other countries on pumping into the system I.
I think the menthol products would be quite quite good and hence on margin should be pretty good, but we don't expect.
The margin to fall for ethylene polyethylene to stay that high and I came to 2017 16 range.
Understood and then for Vinyls, though when you take a look at the consultants outlooks they do expect.
<unk> margins to stay pretty high now through this year and next year.
On.
Should you see a record year and obviously you can see in record here in 'twenty, one, but how do you think that holds up beyond 'twenty. One when you look at the consultants forecast for 'twenty two and beyond.
Well, Mike when you think about the outlook I think the outlook is reflective of what we.
We've seen most recently in terms of demand growth in construction activities worldwide.
On the pull on flooring, therefore going into PVC youre seeing signs of a more.
Even start in manufacturing, but of course, we're all watchful at countries like India and others that are still struggling to get on their feet from a manufacturing perspective.
So as we think about the outlook for our vinyls overall segment, we remain constructive in terms of the demand for worldwide residential and repair and remodeling activities pulling on PVC, but also on.
Cognizant that we really are beginning to see some improvement in caustic really from that manufacturing pull if you will.
So we do have we do have a constructive outlook for the rest of 'twenty one.
I'd just like to add also debt.
Cost of caustic soda price had been quite weak.
Because of the global recession from the pandemic.
The global economy recovers industrial production covers we expect caustic demand will increase and pricing should improve as well.
Great. Thank you.
Youre welcome.
Your next question comes from the line of Hassan Ahmed with on them.
Global.
Good morning, Albert and Steve.
Thanks, John.
First question around volume.
Polyethylene as it relates to the backhaul from dates yet.
As you mentioned sort of in one of your answers to a question earlier debt.
You have industry consultants looking for some moderation or maybe even sort of weakening in pricing in the back half of this year.
I mean, it just seems that there are a bunch of cross car line and I'd love to hear how you're thinking about those cross currents because.
You have a pretty heavy turnaround season in Q2 and Q3.
Have an inventory rebuild that's required because.
You have orders that need to be backfill because of.
On the IPO force matures right.
Above and beyond all of that I could seemed as demand continues to remain very strong. So my question is pricing.
Pricing will do what pricing will do but what are your perceptions about.
Q3, and Q4 effective utilization rates for polyethylene.
Oh, that's a good question.
But you're absolutely right, usually again, even for polyethylene the second and third quarter, usually on a stronger quarter. After year and also those those time also is the time flow turnarounds.
And you have and as we.
<unk> talked about we have on ethylene plants running alone in September as well this year.
So you have that in and then you have the global whether Europe and rest of the world recover from the pandemic or to go into a third or fourth wave.
And all of these have impacts on the global supply demand.
But as we speak as I said earlier inventory is very low among producers were trying to build back inventory volume.
Consumers inventory value also.
So you have that dynamic and then you have the high export price and you have that.
Even the.
The freight shipping costs.
It was all about weather.
If people can export products to the U S and for the future.
Page <unk>.
On the shipping cost is very high now.
Your line was very high went down and came back again. So all of these different cross currents that you said will be affecting prices, Indiana is really supply demand and export price index will price start coming down debt.
Have more chance, although slowing down in price in the U S and.
He will talk about from the June of last year until now there's almost all 40 to 50 cents per pound price increase.
You would think that at some time point there'll be a day.
Reduction on those prices somewhat but I think everybody expect that even after the price reduction is still much higher.
Then the average of 2020 or even 2019.
So the margins are expected to be much improved compared with last two years.
Very helpful very helpful. Albert.
Follow up on on Chloro vinyls.
Again.
A bit of a unique product I guess these days, where there's pretty much hardly any supply on the horizon right and like you said it seems we are in the early innings of an up cycle demand is looking pretty good.
And no one seems to be talking about with this as a backdrop.
The sort of.
Discussed sort of infrastructure bill almost two trillion dollars.
And then under supplied market where demand is good supply demand is already tight how do you see whatever form this infrastructure bill. It takes how do you see that impacting global utilization rates.
Beyond 'twenty one.
Yes, that's a very good question I think so long on the U S. A.
Global economic.
Conditions improve and I think people expect debt beyond 'twenty. One 'twenty two is on the three the global GDP growth will go back to the normal trend line.
And if with lack of new capacity being added I think it bodes well for the existing producers.
But.
You don't know and the global warming.
Unfortunately last year, we had hurricane where the freeze.
Actual disaster is what impact production that we don't know hopefully that very much but the forecast for this year at least the Gulf coast.
Hurricane Index has.
Cool.
Expect to be higher than normal than average hopefully with less damaging the last years.
Very helpful. Thank you so much.
Thank you.
Mike.
<unk> with Barclays.
Great. Thanks, Good morning, guys.
My first question.
Albert I think in your comments on the earnings release, one focus area. You mentioned was furthering your chain integration and other than being sure in a bit of ethylene. It seems like Westlake is already fairly integrated so curious how you're thinking about furthering that integration, whether it's either adding more ethylene or furthering the downstream building products.
Just talk about how youre thinking about your current asset footprint, where there might be GAAP.
That's all the time.
Italy, Yes, you're absolutely right that we are as mentioned earlier, we are a.
One of the largest buyers of ethylene in the U S over 1 billion pounds and asphalt demand for PVC gross ethylene day mail for the increase so integration on debt area.
It will be helpful and downstream, we have a pretty sizable downstream building products based primarily not all of it primarily on PVC and.
We can explain it.
The demand for building part is really <unk>.
Strong and we are finally above the 50 year average for new home construction in the U S.
For the first few months of this year.
So we expect that trend to continue and so on the building products demand will increase and hence we are booking as Steve mentioned, we are adding capacities, we haven't announced the big any big capacity expansion, but small capacity increases to meet the needs going needs on our customers.
Great. That's helpful. And then maybe from a second question just a follow on I think Kevin's recent question about the export market. So for P/e and for PVC, how should we think about Westlake domestic versus export mix today, just given some of the market disruptions.
Suddenly.
In PBC because of our integration with downstream, we tend to export less and U S. Domestic historically over the last few literally the last 10 years. After the housing meltdown to Wade USB exporting PVC around 30% 35%.
Year.
Debt rate has come down a lot.
Last quarter because of lack of supply.
And in polyethylene industry with older expansions, we added last five six years, I think exporting close to 40% of its production.
And Westlake goes our emphasis on low density polyethylene.
Export <unk>.
Motion is much lower the industries.
And again because of the.
The lack of supply in the last few quarters, our export portion has come down a lot.
Great. Thank you guys.
From.
Your next question comes from the lineup.
Blair Tudor Pickering Holt.
Hey, good morning, Albert and Steve.
Morning.
I was hoping you could share more detail on the screen caustic soda initiative, how exactly are you, reducing this year or two what share of your caustic production could be green.
There are two benefits flow into other products like PVC and then should we think about this as like higher upfront costs or would this be higher higher on opex on your own.
Yes, we are buying renewable power as you know our power in Europe. They are combinations of <unk>.
Also a few including coal.
And.
And natural gas and.
Els and buy where you empower.
D C O two content is much lower and hence.
Uh huh.
The 30% reduction in <unk> on the caustic put up from produced.
And it takes quite a while to get certification for their process in Europe.
And we hope to introduce more.
Green friendly mobile friendly products as we go throughout the year and we are trying to provide.
Lois you two products to our customers and to reduce our own.
Manufacturing.
Missions of Seo Seo to everywhere, we can.
Terrific and well.
What kind of Easter you operate or are you at currently.
Does the I guess, if you're below Max operates.
On a $70 per ton caustic price increase in April incentivize you to run harder.
Yes, we are running our plants.
So the free.
Is impacted a lot so.
Running our plants to meet the demand of our customers and unfortunately because of the freeze.
Still under allocation and hopefully you're able to lifting allocation very soon in near future.
Many of our <unk>.
Industry competitors also having fees and other problems.
So I think most companies.
Running as hard we can to meet our customers' needs.
Great. Thank you.
Welcome.
Your next question comes from the line of <unk>.
On this one Nathan.
RBC capital markets.
Hi, sorry about that earlier, thanks for taking my question I hope you're all well.
Congrats on this on the strong start here.
So I guess a couple of things so first off on the chlorine side seems very tight.
We're hearing issues about availability of corrine, especially through the summer I know theres, a water treatment season coming up.
So are you at all concerned about <unk>.
Servicing a demand on chlorine and then secondarily on caustic we are seeing some price uplift now how long do you expect that to continue I guess and what's your outlook for both sides.
Of the <unk> molecule.
Thank you, yes, youre right that the whole bundle as chain is demand is strong and because also the free some as I said earlier many of our plants in the U S being impacted and most other qualified plans into industry along the Gulf Coast. So we'll head on impact on debt.
And because of the strong demand for PVC, hence the flooring is very tight.
And several of them.
Price announcement would be made on the cost ex side as the economy recovers.
Coffee is also improving and not only the U S.
International caustic prices in Asia, and Europe on improving as well, but you also had a strong demand and recovery of the industrial industrial production around the world. So.
That we have based on our price announced price increases and we're getting a large share of the price increase we announce.
Great. Thanks for that and then I guess.
Also on PVC ethylene I guess did kind of see a little bit of a spike because of the storm.
On prices, maybe receding here, but obviously demand is very strong so a do you expect.
PVC price increases that you gained earlier to roll back here or do you think there's potential that you can continue to hold onto rule on that.
Yes, as we have discussed earlier, we have a series of price increases since June of last year as the economy recovered from the recovered from the pandemic.
And demand is strong inventory is very low.
On the allocation and export price is higher than domestic price.
So those dynamics still exist today and as a further announcement on price increases for me as well.
We are still in the early part of May.
So.
The strength depends very strong and the pricing.
It'll it'll be what it is going to going forward as supply demand and export price export demand as well.
Okay. Thanks, I'll turn it over.
As a reminder to ask a question on star.
One on your telephone.
Next is John Roberts with UBS.
Did you resell any electricity, our ethane or anything else to help offset the storm impact.
So John Yes, we did but the relative impact during that period was relatively small.
Okay, and then Albert you mentioned the turnaround coming up in September you've had.
Lot of downtime over the past 12 months.
To accelerate any maintenance or anything into those unplanned downtime debt maybe on average over the next couple of years, we will have below average maintenance expense from turnaround impact.
Yes, we did what we could as you know the turnaround you have to have all of the the past the labor and.
Jigs and everything else ready for a major turnaround. So we did what we could during the time period.
But I think the turnaround schedule she'll go through and hopefully as you said, we can reduce a few days share there, but not material.
Okay. Thank you.
Yes, John just to add to my comments, we operate in Louisiana, which is a regulated market.
So there are some limitations in terms of our ability to have some upside on on any resale under the market.
At this time.
Hi, Nathan.
Are there any closing remarks.
Thank you again for participating in today's call. We hope you'll join US again for our next conference call to discuss our second quarter 2021 results.
Okay.
Thank you for participating in today's Westlake Chemical Corporation first quarter earnings Conference call. As a reminder, this call will be available for replay beginning two hours. After the call has ended and may be it.
Ex tests until 11 59 P M. Eastern time on Tuesday May 11, 2021.
The replay can be accessed by calling the following numbers.
Domestic callers should dial 8558592056.
International callers may access the replay at 4045373406.
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Okay.
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