Q2 2024 Westlake Corp Earnings Call

August 6, 2024

Participants will be in a listen only mode. After the Speakers' 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.

Speaker Change: <unk> 2024, I would now like to turn the call over to your host John seller, Westlake, Vice President and Treasurer, Sir you may begin.

John Seller: Thank you good morning, everyone and welcome to the Westlake Corporation Conference call to discuss our second quarter 2024 results.

Okay.

Speaker Change: Good morning, ladies and gentlemen, thank you for standing by welcome.

Speaker Change: The Westlake Corporation second quarter 2024 earnings conference call. During the presentation, all participants will be in a listen only.

Speaker Change: I'm joined today by Albert Chao, Our executive Chairman, John Marc Gilson, our President and CEO, Steve Bender, Our executive Vice President and Chief Financial Officer, and other members of our management team.

Speaker Change: Ali mode.

Speaker Change: The Speakers' remarks, you'll be invited to participate in a question and answer session. As a reminder, ladies and gentlemen, the coffee break today August six 2024, I would now like to turn the call over to your host John seller, Westlake, Vice President and Treasurer, Sir you may begin.

Speaker Change: During the call we will refer to our two reporting segments performance in our central materials, which we refer to as Pam where materials and housing and infrastructure products, which we refer to as hip where products today's conference.

Speaker Change: Call will begin with Albert and John Mark who will open with a few comments regarding Westlake performance.

John Seller: Thank you good morning, everyone and welcome to the Westlake Corporation Conference call to discuss our second quarter 2024 results.

Speaker Change: Steve will then discuss our financial and operating results after which Albert will add a few concluding comments and we will open up the call to questions.

John Seller: Joined today by Albert Chao, Our executive Chairman, John Marc 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 in our central materials, which we refer to as Pam where materials and <unk>.

Speaker Change: 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.

Speaker Change: These forward looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. These risks and uncertainties are discussed in Westlake <unk> 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 <unk>.

John Seller: Housing and infrastructure products, which we referred to as hip where products.

Speaker Change: Today's conference call will begin with Albert and John Mark who will open with a few comments regarding west who will open with a few comments regarding Westlake performance. Steve will then discuss our financial and operating results after which Albert will add a few concluding comments and we will open up the call to questions.

Speaker Change: Differ by reviewing these SEC filings, which are also available on our Investor Relations website.

Speaker Change: This morning, Westlake issued a press release with details of our second quarter results. This document is available in the press release section of our website at Westlake Dot com.

Speaker Change: 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.

Speaker Change: We have also included an earnings presentation, which can be found on the Investor Relations section of our website.

Speaker Change: A replay of todays calls will be available beginning today two hours following the conclusion of this call. This.

Speaker Change: This replay may be accessed via Westlake website.

Speaker Change: 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.

Speaker Change: Please note that information reported on this call speaks only as of today August 6th 2024, and therefore, you are advised that time sensitive information may no longer be accurate as of the time of any replay.

Speaker Change: 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 Dot com.

Speaker Change: We have also included an earnings presentation, which can be found on the Investor Relations section of our website.

Speaker Change: Now I'd like to turn the call over to Albert Chao Albert Thank.

Albert Chao: Thank you Joe Good morning, everyone. We appreciate you joining us to discuss our second quarter 2024 results.

Speaker Change: A replay of todays calls will be available beginning today two hours following the conclusion of this call. This.

Speaker Change: This replay may be accessed via Westlake website.

Speaker Change: I am pleased to announce that we reported record quarterly results for hip segment in the second quarter of 2024.

Speaker Change: Which contributed to year over year companywide earnings growth this quarter.

Speaker Change: We achieved this despite a slower than expected global macroeconomic recovery.

Speaker Change: 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 Dot com.

Speaker Change: All in the downturn in macroeconomic conditions that began in the second half of 2022.

Speaker Change: Now I'd like to turn the call over to Albert Chao Albert Thank.

Speaker Change: Average annual rate of housing starts through June 2024.

Albert Chao: Thank you Joe Good morning, everyone. We appreciate you joining us to discuss our second quarter 2024 results.

Speaker Change: So the average for 2023.

Speaker Change: For the second quarter of 2024.

Speaker Change: I am pleased to announce that we reported record quarterly results for hip segment.

Speaker Change: We reported net sales of $3 2 billion.

Speaker Change: EBITDA of $744 million net.

Speaker Change: Second quarter of 2024.

Speaker Change: Net income of $313 million.

Speaker Change: Which contributed to year over year companywide earnings growth this quarter.

Speaker Change: <unk> $2 40 per share.

Speaker Change: Which will each an improvement from the second quarter of 2023.

Speaker Change: We achieved this despite a slower than expected global macroeconomic recovery.

Speaker Change: We benefited from higher volumes across the board and our hip segment.

Speaker Change: All in the downturn in macroeconomic conditions that began in the second half of 2022.

Speaker Change: Led by pipe fittings, and sidings and trim.

Speaker Change: And the average annual rate of housing starts through June 2024 below the average for 2023.

Speaker Change: And also higher volumes across our materials portfolio and pen.

Led by PVC resin and caustic soda.

Speaker Change: For the second quarter of 2024.

Speaker Change: Average sales price in both segments was lower year over year in the second quarter.

Speaker Change: We reported net sales of $3 2 billion EBIT.

Speaker Change: EBITDA of $744 million netting.

Speaker Change: Primarily due to the declining PVC resin caustic soda and pipe and fitting prices that occurred last year.

Speaker Change: Net income of $313 million or $2 40 per share.

Speaker Change: Which will each an improvement from the second quarter of 2023.

Speaker Change: On a sequential basis.

Speaker Change: Volume rose by 15%.

Speaker Change: As we benefited from higher volumes across the board and our hip segment.

Speaker Change: Driven by seasonal increases in demand and product cross selling.

Speaker Change: Led by pipe fittings, and sidings and trim.

Speaker Change: With stable average sales price.

Speaker Change: Volume gains sequentially and pen, 1%, while average sales price rose 4%.

Speaker Change: And also higher volumes across our materials portfolio and pen.

Speaker Change: PVC resin and caustic soda.

<unk>. This was the first sequential increase in average sales price things destocking cycle that we experienced last year.

Speaker Change: Average sales price in both segments was lower year over year in the second quarter.

Speaker Change: Primarily due to the declining PVC resin caustic soda and pipe and fitting prices that occurred last year.

Speaker Change: During the quarter.

Speaker Change: We continue to see the benefits of our vertical integration strategy.

Speaker Change: On a sequential basis.

Speaker Change: As strong demand for pipe and fittings and siding and trim in the hip segment.

Speaker Change: <unk> rose by 15%.

Speaker Change: Even by seasonal increases in demand.

Speaker Change: Helped drive PVC sales volumes, improving pin PVC sales mix and margins.

Speaker Change: And product cross selling with stable average sales price.

Speaker Change: As we are able to ship sales volumes from less attractive export markets.

Speaker Change: Volume gains sequentially and pen 1%.

Speaker Change: Our average sales price rose 4%.

Speaker Change: We also saw continued benefits from our portfolio diversification strategy during the quarter as.

Penn: For Penn This was the first sequential increase in average sales price things destocking cycle that we experienced last year.

Speaker Change: That's a slow recovery in <unk> margins and earnings.

Speaker Change: Due to continued weak global industrial demand.

Penn: During the quarter.

Speaker Change: Were supported by solid earnings growth and margin expansion.

Penn: We continue to see the benefits of our vertical integration strategy.

Speaker Change: From growth in residential housing construction and infrastructure bill related spending.

Penn: As strong demand for pipe and fittings and siding and trim in the hip segment.

Speaker Change: Overall, we're very pleased with performance of both of our segments and integration benefits of our portfolio of businesses.

Penn: Helped drive PVC sales volumes, improving pin PVC sales mix and margins.

Penn: As we are able to ship sales volumes from less attractive export markets.

Speaker Change: And the value of this strategy delivers to Westlake and our investors.

Penn: We also saw continued benefits from our portfolio diversification strategy during the quarter.

Speaker Change: We're happy to welcome Joe Mara Gilson to Westlake team with the appointment as our new President and CEO.

Penn: The slow recovery in <unk> margins and earnings.

Speaker Change: He is a seasoned industry leader with a proven track record of delivering sustained financial performance.

Penn: Due to continued weak global industrial demand.

Penn: Supported by solid earnings growth and margin expansion.

Speaker Change: With leadership roles in the U S Europe and Asia.

Penn: From growth in residential housing construction and infrastructure bill related spending.

Speaker Change: Recently, as president and CEO of Mitsubishi Chemical group.

Penn: Overall, while there.

Speaker Change: Joe Mark's appointment is the culmination of a thoughtful succession plan.

Penn: Very pleased with performance of both of our segments and integration benefits of our portfolio of businesses and.

Speaker Change: That ensures a continuation of our strategy to create long term value for our shareholders.

Penn: And the value of this strategy delivers to Westlake and our investors.

Speaker Change: I'd now like to turn the call over to Jean Marc to provide some initial thoughts Joe Mark.

Speaker Change: We're happy to welcome Joe Mara Gilson to Westlake team with the appointment as our new President and CEO.

Joe Mark: Thank you Albert and good morning, everyone.

Speaker Change: He is a seasoned industry leader with a proven track record of delivering sustained financial performance.

Joe Mark: It's a pleasure to join Westlake at such an exciting time in the company's history.

Speaker Change: With leadership roles in the U S Europe and Asia.

Jean Marc: While I am new to the company I've been around the chemical industry for many decades in a variety of leadership roles.

Speaker Change: Recently, as president and CEO of Mitsubishi Chemical group.

Speaker Change: Joe Mark's appointment is the culmination of a thoughtful succession plan.

Joe Mark: And I have long admired Westlake.

Speaker Change: That ensures the continuation of our strategy to create long term value for our shareholders.

Jean Marc: <unk> focus on safe.

Joe Mark: And reliable low cost operation.

Speaker Change: I'd now like to turn the call over to Jean Marc to provide some initial thoughts Joe Mark.

Jean Marc: And environmental stewardship.

Speaker Change: I also recognize that shareholders value Westlake history of profitable growth through disciplined investments to create long term value.

Joe Mark: Thank you Albert and good morning, everyone.

Joe Mark: It's a pleasure to join Westlake at such an exciting time in the company's history.

Speaker Change: Since founding Westlake nearly 40 years ago.

Jean Marc: While I am new to the company.

Jean Marc: Been around the chemical industry for many decades in a variety of leadership roles.

Speaker Change: Bert and James.

Speaker Change: Along with the rest of the board and leadership team.

Speaker Change: If created an incredible company.

Joe Mark: And I have long admired Westlake.

Speaker Change: That improves the lives of so many people.

Speaker Change: Focus on safe.

Speaker Change: And reliable low cost operation.

Speaker Change: The world.

Speaker Change: And thats its an honor to be given the privilege.

Speaker Change: And environmental stewardship.

Speaker Change: I also recognize that shareholders value Westlake history of profitable growth through disciplined investments to create long term value.

Speaker Change: To build upon such a successful foundation.

Speaker Change: While I have only been at the company for a few weeks.

Speaker Change: I've had the opportunity to meet many of my co workers.

Speaker Change: Since founding Westlake nearly 40 years ago.

Speaker Change: And I wanted to share with you some initial thoughts.

Speaker Change: Bert and James.

Speaker Change: Along with the rest of the board and leadership team.

Speaker Change: First.

Speaker Change: I look forward to building on the successful strategy and focus on driving value for our customers.

Speaker Change: If created an incredible company.

Speaker Change: That improves the lives of so many people.

Speaker Change: And shareholders.

Speaker Change: The world.

Speaker Change: Second.

Speaker Change: And thats its an honor to be given the privilege.

Speaker Change: The current portfolio is a great mix.

Speaker Change: To build upon such a successful foundation.

Speaker Change: Globally cost advantage materials and Ben.

Speaker Change: While I have only been at the company for a few weeks.

Speaker Change: And innovative differentiated products with strong brands in.

Speaker Change: I've had the opportunity to meet many of my co workers.

Speaker Change: Hip.

Speaker Change: Third.

Speaker Change: And I wanted to share with you some initial thoughts.

Speaker Change: I think both segments.

Speaker Change: Complement each other synergistically.

First.

Speaker Change: I look forward to building on the successful strategy and focus on driving value for our customers.

Speaker Change: As demonstrated by the solid second quarter financial results.

Speaker Change: That we reported today.

Speaker Change: And shareholders.

Speaker Change: And I think that there is a solid runway to continue to grow the company in these two verticals for the foreseeable future.

Speaker Change: Second.

Speaker Change: The current portfolio is a great mix.

Speaker Change: Globally cost advantage materials and Ben.

Speaker Change: I look forward to sharing more thoughts with all of you in the near future.

Speaker Change: And innovative differentiated products with strong brands in.

Speaker Change: I would now like to turn our call over to Steve to provide more detail on our financial results for the second quarter Steve.

Speaker Change: Hip.

Speaker Change: Third.

Speaker Change: I think both segments.

Speaker Change: Complement each other synergistically.

Steve Bender: Thank you very much mark and welcome to Westlake and good morning, everyone.

Speaker Change: As demonstrated by the solid second quarter financial results.

Steve Bender: Westlake reported net income of $313 million or $2 40 per share in the second quarter on sales of $3 2 billion.

Speaker Change: We reported today.

Speaker Change: And I think that there is a solid runway to continue to grow the company in these two verticals for the foreseeable future.

Speaker Change: Net income for the second quarter of 2024 increased $16 million from the second quarter of 2023, primarily due to higher sales volumes for all of our product lines and our hip segment, particularly for pipe and fittings siding and trim.

Speaker Change: I look forward to sharing more thoughts with all of you in the near future.

Speaker Change: Yeah.

Speaker Change: I would now like to turn our call over to Steve to provide more detail on our financial results for the second quarter Steve.

Speaker Change: When compared to the first quarter of 2024 net income increased by $139 million in the second quarter driven by an increase in demand from a seasonal pickup in construction activity cross selling in the hip segment and.

Steve: Thank you very much John Mark and welcome to Westlake and good morning, everyone.

Steve: Westlake reported net income of $313 million or $2 40 per share in the second quarter on sales of $3 2 billion.

Speaker Change: And higher average sales price in our <unk> segment, particularly for PVC resin and polyethylene, reflecting some improvement in the supply demand picture as a global markets slowly recover.

Speaker Change: During the second quarter, and we continue to make progress on our company wide cost savings initiative with approximately $50 million of savings delivered during the second quarter.

Speaker Change: Compared to the first quarter of 2024 net income increased by $139 million in the second quarter, driven by an increase in demand from a seasonal pickup in construction activity.

Speaker Change: These savings combined with those achieved in the first quarter total approximately $85 million of long term cost reductions in the first half of 2024 towards our full year target of $125 million to $150 million.

Speaker Change: Ross selling in the hip segment.

Speaker Change: These efforts build on the $110 million of cost reductions that we delivered in 2023 as we continue our focus on capturing acquisition synergies and improving our reliable cost effective business model.

Speaker Change: During the second quarter, and we continue to make progress on our companywide cost savings initiatives with approximately $50 million of savings delivered during the second quarter.

Speaker Change: For the second quarter of 2024, our utilization of the FIFO method of accounting resulted in a favorable pre tax impact of $12 million compared.

Speaker Change: Compared to what earnings would have been reported on the LIFO method.

Speaker Change: This is only an estimate and has not been audited.

Speaker Change: Before I discuss the details of our segment results I want to provide some high level thoughts on the quarter.

Speaker Change: In the second quarter of 2024 weeks, we saw a continuation of the market trends that we experienced in the first quarter, including building products demand growth driving sequential sales volume improvement by 15% and modest improvement in demand for materials in our <unk> segment.

Speaker Change: For the second quarter of 2024, our utilization of the FIFO method of accounting resulted in a favorable pre tax impact of $12 million compared to what earnings would have been reported on the LIFO method. This is only an estimate and has not been audited.

Speaker Change: Which supported improvement in Perm average sales price of 4% during the second quarter.

Speaker Change: These trends combined with our cost cutting and synergy attainment efforts drove record quarterly EBITDA of $336 million and record quarterly EBITDA margins, 28% and our hip segment and.

Speaker Change: Before I discuss the details of our segment results I want to provide some high level thoughts on the quarter.

Speaker Change: An improvement in our Perm EBITA margin to 19% from 13% in the first quarter.

Speaker Change: Notably the record hip results are occurring against a backdrop of historically lower levels of resident residential construction activity.

Speaker Change: That necessarily as necessary to meet societies needs for housing and elevated mortgage rates.

Speaker Change: <unk> average sales price of 4% during the second quarter.

Speaker Change: As a testament to our positioning in the market and margin improvement efforts.

Speaker Change: Combined the solid growth in hip and progress towards margin recovery in Perm drove a return to year over year quarterly earnings growth for Westway. Despite the current global microeconomic conditions.

Speaker Change: An improvement in our EBITDA margin to 19% from 13% in the first quarter.

Speaker Change: Moving to the specifics of our segment performance, our housing and infrastructure products segment produced record EBITDA of $336 million on $1 $2 billion of sales.

Speaker Change: Notably the record hip results are occurring against a backdrop of historically lower levels of resident residential construction activity.

That necessarily as necessary to meet societies needs for housing and elevated mortgage rates.

Speaker Change: EBITDA increased $92 million year over year due to a solid 16% increase in sales volumes, particularly for pipe and fittings and siding and trim.

Speaker Change: As a testament to our positioning in the market and margin improvement efforts.

Speaker Change: In addition to the sales volume growth and earnings improvement were supported by lower material costs compared to the prior year period, an acquisition synergy and cost cutting benefits.

Speaker Change: When compared to the first quarter of 2024 hit segment sales of $1 2 billion rose by $150 million driven by a 15% sequential increase in sales volumes and stable average sales prices.

Speaker Change: Moving to the specifics of our segment performance, our housing and infrastructure products segment.

Speaker Change: <unk> record EBITDA of $336 million on $1 $2 billion of sales.

Speaker Change: EBITDA increased $92 million year over year due to a solid 16% increase in sales volumes, particularly for pipe and fittings and siding and trim.

Speaker Change: Housing product sales of $1 billion in the first quarter increased 15% due to solid sales volume growth in each major product category.

Speaker Change: Infrastructure product sales of $184 million in the second quarter increased 12% from the first quarter of 2024, primarily due to higher demand for larger diameter municipal pipe for water applications.

Speaker Change: Hits EBITDA margin of 28% set a new quarterly record and the margin expansion from 22% in the prior year period, primarily due to higher sales volumes and lower material costs, while the sequential improvement from 25% in the first quarter of 2024 was primarily due.

Speaker Change: Housing product sales of $1 billion in the first quarter increased 15% due to solid sales volume growth in each major product category.

Speaker Change: Due to higher sales volume.

Speaker Change: Moving to our <unk> segment second quarter EBITDA of $391 million was lower than the second quarter of 2023, EBITDA of $435 million due to lower average selling prices, particularly for caustic soda and PVC and epoxy resins.

Speaker Change: Although our sales prices drove a year over year decline in EBITDA, our sales volumes in all product categories in our <unk> segment saw improved customer demand compared to the second quarter of 2023, resulting in a 11% increase in sales volume.

Speaker Change: On a sequential basis Perm segment EBITDA of $391 million in the second quarter increased by $138 million from the first quarter of 2024.

Speaker Change: Due to higher sales volume.

Speaker Change: <unk> have higher average sales price, primarily driven by higher prices for PVC resin and polyethylene.

Speaker Change: While we are pleased with the progress that <unk> has made in recovering margins for most of its products profitability in our European epoxy business remains challenged.

In part due to the adverse impact low priced import competition.

Speaker Change: As a result, and after careful consult consultant consulting <unk> with key stakeholders.

Speaker Change: On a sequential basis <unk> segment EBITDA of $391 million in the second quarter increased by $138 million from the first quarter of 2024.

Last week, we announced plans to temporarily cease operations in mothball, our <unk> unit in the Netherlands to improve the profitability of our proxy business.

Speaker Change: <unk> have higher average sales price, primarily driven by higher prices for PVC resin and polyethylene.

Speaker Change: We expect to incur pre tax cost of approximately $80 million related to the mark borrowing of the unit with substantially all of those cost expected to be recorded in the third quarter of 2024 with cash outflows expected to occur over several years starting in 2025.

Speaker Change: While we are pleased with the progress that <unk> has made in recovering margins for most of its products profitability in our European <unk> business remains challenged and.

Speaker Change: In part due to the adverse impact of low priced import competition.

Speaker Change: We expect these actions will materially improve the financial performance of our European and proxy business without having any impact on our customers.

Speaker Change: A result, and after careful consulted consolidation with key stakeholders.

Speaker Change: Last week, we announced plans to temporarily cease operations in mothball, our <unk> unit in the Netherlands to improve the profitability of our proxy business.

Speaker Change: Our U S. Epoxy anti dumping case continues to progress with an expectation that provisional duties will be set sometime later this year.

Speaker Change: Likewise, the European Union has launched a similar antidumping investigation.

Speaker Change: We expect to incur pre tax cost of approximately 80 million euros related to the mark borrowing of the unit.

Speaker Change: Lastly believes in free and fair trade and thus the antidumping investigations and the potential duties to be applied along with our proactive actions in Europe, we believe will level, the competitive markets and restore our <unk> business to profitability.

Speaker Change: Substantially all of those costs expected to be recorded in the third quarter of 2024 with cash outflows expected to occur over several years starting in 2025.

Speaker Change: We expect these actions will materially improve the financial performance of our European epoxy business without having any impact on our customers.

Speaker Change: Shifting to our balance sheet.

Speaker Change: As of June 32024, cash and cash equivalents were $3 billion in total debt was $4 9 billion with a staggered long term fixed rate debt maturity schedule, including $300 million of maturing debt that we expect to retire in the third quarter of 2020 for using our strong liquidity.

Speaker Change: Our U S. A potsy antidumping case continues to progress with an expectation that provisional duties will be set sometime later this year.

Speaker Change: Likewise, the European Union has launched a similar antidumping investigation.

Speaker Change: For the second quarter of 2024, net cash provided by operating activities of $237 million.

Speaker Change: Including the cash payment of the litigation charge, we took in the fourth quarter of 2023.

Speaker Change: Our cash generative business model provides us with a platform to deploy our balance sheet strategically in order to create long term value for our stakeholders.

Speaker Change: Shifting to our balance sheet.

Speaker Change: Now let me provide some guidance for your models.

Speaker Change: Based on our current view of demand and prices. We continue to expect 2020 for revenue in our housing and infrastructure products segment to be to be between four three and $4 6 billion with possible upside beyond our EBITDA margin guidance of 22%.

Speaker Change: For the second quarter of 2024 net cash provided by operating activities of $237 million included the cash payment of the litigation charge, we took in the fourth quarter of 2023.

Speaker Change: We continue to expect our total capital expenditures to be approximately $1 billion, which is similar to our depreciation and amortization run rate as.

Speaker Change: Our cash generative business model provides us with a platform to deploy our balance sheet strategically in order to create long term value for our stakeholders.

Speaker Change: As a reminder, this includes cost to a planned turnaround at our Petro one ethylene unit scheduled to begin next month that is projected to last approximately 60 days.

Speaker Change: Now let me provide some guidance for your models.

Speaker Change: Based on our current view of demand and prices. We continue to expect 2020 for revenue in our housing and infrastructure product segment to be to be between four three and $4 6 billion.

We continue to target $125 million to $150 million of companywide cost savings in 2024.

Speaker Change: With approximately $85 million already achieved in the first half of this year, including $50 million in the second quarter for.

Speaker Change: With possible upside beyond our EBITDA margin guidance of 22%.

Speaker Change: For the full year of 2024, we expect our effective tax rate to be approximately 23% and we expect cash interest expense to be approximately $160 million now.

Speaker Change: We continue to expect our total capital expenditures to be approximately $1 billion, which is similar to our depreciation and amortization run rate.

Speaker Change: As a reminder, this includes cost for a planned turnaround at our Petro one ethylene unit scheduled to begin next month that is projected to last approximately 60 days.

Speaker Change: Now I'd like to turn the call over to Albert to provide our current outlook for our business Albert.

Albert Chao: Thank you Steve.

Albert Chao: Overall, we are pleased with the performance in the second quarter of 2020 for despite a challenging macroeconomic environment.

Speaker Change: We continue to target $125 million to $150 million of companywide cost savings in 2024.

Albert Chao: As we look ahead to the remainder of the year.

Speaker Change: With approximately $85 million already achieved in the first half of this year, including $50 million in the second quarter.

Speaker Change: Remain cautiously optimistic.

Speaker Change: And we will continue to manage our production and inventory levels to customer demand.

For the full year of 2024, we expect our effective tax rate to be approximately 23% and we expect cash interest expense to be approximately $160 million.

Speaker Change: While order books remain solid.

Speaker Change: Unusually wet and hard weather conditions in many parts of North America.

Speaker Change: Combined with the recent slowdown in U S housing starts and remodeling activity.

Speaker Change: Now I'd like to turn the call over to Albert to provide our current outlook for our business Albert.

Speaker Change: It could have an impact on our sales volume in the second half of 2024.

Albert Chao: Thank you Steve.

Albert Chao: Overall, we are pleased with the performance in the second quarter of 2024.

Speaker Change: <unk> in the U S and Europe slipped during the second quarter.

Albert Chao: Despite the challenging macroeconomic environment.

Speaker Change: While similar metrics in China also reflect slowing conditions.

Albert Chao: As we look ahead to the remainder of the year.

Speaker Change: We remain cautiously optimistic.

Speaker Change: Which could translate into a slowing demand for some of our <unk> products.

Speaker Change: And we will continue to manage our production and inventory levels to customer demand.

Speaker Change: Overall.

Speaker Change: While the pace of global economic growth remains unclear.

Speaker Change: While order books remain solid.

Speaker Change: Unusually wet and hard weather conditions in many parts of North America.

Speaker Change: We're encouraged by the trend of solid year over year volume growth in hip.

Speaker Change: Combined with the recent slowdown in U S housing starts and remodeling activity.

Speaker Change: And volume and margin recovery in pen.

Speaker Change: <unk> delivered in the second quarter of 2024.

Speaker Change: Could have an impact on our sales volume in the second half of 2024.

Speaker Change: As we look beyond this year, we expect each of our segments to continue to improve.

Speaker Change: <unk> is in the U S and Europe slipped during the second quarter.

Speaker Change: As for the <unk> hip teaching event.

Speaker Change: While similar metrics in China also reflect slowing conditions.

Speaker Change: We expect hip sales to organically grow at a 5% to 7% long term compound annual rate with.

Speaker Change: Which could translate into a slowing demand for some of our <unk> products.

Speaker Change: With a large pool of attractive inorganic growth opportunities.

Speaker Change: Overall.

Speaker Change: While the pace of global economic growth remains unclear.

Speaker Change: We expect this growth to be supported by the structural under supply of homes in North America.

Speaker Change: We're encouraged by the trend of solid year over year volume growth in hip.

Speaker Change: In volume and margin recovery in pen.

Speaker Change: The aging housing stock.

Speaker Change: And spending related to the infrastructure and to offset.

Speaker Change: Delivered in the second quarter of 2024.

Speaker Change: As we look beyond this year, we expect each of our segments to continue to improve.

Speaker Change: We will continue to invest in our brands.

Speaker Change: <unk> and our people.

Speaker Change: To continue creating value over the cycle falling versus.

Speaker Change: As for the <unk>.

Speaker Change: June hip teaching event.

Turning to Perm.

Speaker Change: We expect hip sales to organically grow at a 5% to 7% long term compound annual rate.

Speaker Change: We remain positive on the outlook for long term growth.

Speaker Change: Driven by increasing global consumer activity and demand for clean water electrification housing transportation.

Speaker Change: With a large pool of attractive inorganic growth opportunities.

Speaker Change: We expect this growth to be supported by the structural under supply of homes in North America.

Speaker Change: And renewable energy.

Speaker Change: Favorable demographic demographic trends and new product innovations, including our sustainability offerings.

Speaker Change: An aging housing stock.

Speaker Change: And spending related to the infrastructure.

Speaker Change: To offset.

Speaker Change: We will continue to invest in our brands.

Speaker Change: We expect these trends to support a better balance between global supply and demand for our products in our <unk> segment.

Speaker Change: Capabilities and our people.

Speaker Change: To continue creating value over the cycle for investors.

Speaker Change: With our strong focus on our cost structure and productivity, we are well positioned to leverage volume growth when market returns to normalized growth rates.

Speaker Change: Turning to <unk>, we remain positive on the outlook for long term growth.

Speaker Change: Driven by increasing global consumer activity and demand for clean water electrification housing transportation and renewable energy.

Yeah.

Speaker Change: Turning to our balance sheet.

Speaker Change: We continue to look for opportunities to put our $3 billion cash balance to work in a disciplined manner that will create long term value for our shareholders.

Speaker Change: Favorable demographic demographic trends.

Speaker Change: New product innovations, including our sustainability offerings.

Speaker Change: This includes both identifying acquisition candidates.

Speaker Change: We expect these trends to support a better balance between global supply and demand for our products in our <unk> segment.

Speaker Change: Can seed our risk adjusted cost of capital.

Speaker Change: And returning cash to shareholders through both dividends and share repurchases.

Speaker Change: With our strong focus on our cost structure and productivity, we are well positioned to leverage volume growth when market returns to normalized growth rates.

Speaker Change: Finally.

Speaker Change: We continue to advance our sustainability efforts.

Speaker Change: During the second quarter adoptions of our innovations to address customers' sustainability requirements increased.

Speaker Change: Turning to our balance sheet.

Speaker Change: We continue to look for opportunities to put our $3 billion cash balance to work in a disciplined manner that will create long term value for our shareholders.

Speaker Change: Including significant growth in.

Speaker Change: PVC pipe.

Speaker Change: Green Bean PVC resin and pivotal post consumer resin for flexible polyethylene packaging.

Speaker Change: This includes both identifying acquisition candidates that can exceed our risk adjusted cost of capital.

Speaker Change: Yeah.

Speaker Change: The market reception for our PVC pipe product has been strong.

Speaker Change: And returning cash to shareholders through both dividends and share repurchases.

Speaker Change: As we announced plans to expand our capacity with a new plant in Wichita Falls, Texas site.

Speaker Change: Finally.

We continue to advance our sustainability efforts.

Speaker Change: To meet growing customer demand.

Speaker Change: During the second quarter adoptions, our innovations to address customers' sustainability requirements increased.

Speaker Change: As a reminder, we launched PVC pipe in North America in 2021.

Speaker Change: And we have seen strong customer appreciation, while PVC or sustainability attributes things.

Speaker Change: Including significant growth.

Speaker Change: In our PVC pipe Green Bean, PVC resin and pivotal post consumer resin for flexible polyethylene packaging.

Speaker Change: Since they are lighter weight easier to install and provide increased performance compared to standard PVC pipe.

Speaker Change: The market reception for our PVC pipe products has been strong.

Speaker Change: Looking forward.

Speaker Change: We will continue to invest appropriately to bring new products like <unk> to the market.

Speaker Change: Thus, we announced plans to expand our capacity with a new plant in Wichita Falls, Texas site.

Speaker Change: And expand our production capabilities for existing products.

Speaker Change: To help our customers address their sustainability needs.

Speaker Change: To meet growing customer demand.

Speaker Change: As a reminder, we launched PVC pipe in North America in 2021.

Speaker Change: Thank you very much for listening to our second quarter earnings call I will now turn the call back over to Joan. Thank you Albert before we begin taking questions I would 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.

Speaker Change: And we have seen strong customer appreciation, while PVC or sustainability attributes.

Speaker Change: Thanks to our lighter weight easier to install and provide increased performance compared to standard PVC pipe.

Speaker Change: Looking forward we.

Speaker Change: After the call has ended.

Speaker Change: We will continue to invest appropriately to bring new products like <unk> to the market.

Speaker Change: Just wonder we will now take questions.

Speaker Change: Thank you at this time, we will conduct a question and answer session.

Speaker Change: Expand our production capabilities for existing products.

Speaker Change: As a reminder.

Speaker Change: Please go ahead.

Speaker Change: <unk>.

Speaker Change: To help our customers address their sustainability needs.

Speaker Change: And we figured into the analysis to withdraw your question. Please press star one.

Speaker Change: Thank you very much for listening to our second quarter earnings call.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Now I'll turn the call back over to Joan Thank you Albert.

Joan: Where we begin taking questions I would 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.

Speaker Change: Our first question comes from Patrick.

Speaker Change: Sydney.

Patrick: Hi, good morning, and congratulations and welcome to John Mark.

Maybe my first question just on the sales and margin guide for hip that you've maintained but mentioned there is potential upside within that what do you see as the biggest potential sources of upside there and does the current guide assume materials costs go up or hold relatively stable in the second half and maybe some modest price declines there. Thank you.

Speaker Change: <unk>, we will now take questions.

Speaker Change: Thank you.

Speaker Change: This time, we will conduct a question and answer session. As a reminder to ask a question. Please press star one on your telephone.

Speaker Change: And when Youre going to announce to withdraw your question. Please press star one.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: Yeah, Good morning, Patrick and yes, as we think about the outlook for the hip segment strong results this quarter and our guidance really was.

Speaker Change: Our first question comes from Patrick Cunningham at Citi.

Speaker Change: To say that there is potential upside to the guidance of 22% that we've provided we've seen increases in materials cost and PVC resin and we continue to think that that will continue to be.

Patrick Cunningham: Hi, good morning, and congratulations and welcome to John Mark.

Patrick Cunningham: Maybe my first question just on the sales and margin guide for that you maintained but mentioned there is potential upside within that what do you see as the biggest potential sources of upside there and does the current guide assume materials costs go up or hold relatively stable in the second half and maybe some modest price declines there. Thank you.

Speaker Change: A reasonable level of construction activity, we've seen the guidance from a number of research firms like NIH be and others that show housing starts could decline later this year and so as we think about that we still think the cross selling and.

Speaker Change: Yeah, Good morning, Patrick and yes, as we think about the outlook for the hip segment strong results this quarter and our guidance really was.

Speaker Change: Capability to continue to push forward and value propositions for our products remains which is why we provided some potential upside in that guidance.

Speaker Change: To say that there is potential upside to the guidance of 22% that we've provided we've seen increases and materials cost and PVC resin and we continue to think that that will continue to be.

Speaker Change: Understood very helpful. And then are you based on that are you anticipating.

Speaker Change: Any sequential improvement in the <unk> segment I know you cited some industrial softness there, but it looks like there should be continued pricing strength in polyethylene and PVC. So what should we expect in terms of the Perm segment sequentially.

Speaker Change: Yes, certainly.

Speaker Change: We were able to achieve price increases in both polyethylene and PVC and export prices and has also been moving up. So we are seeing some stabilization of prices and prices are moving up stocking. We believe is over than more so is what the global economic conditions look like going forward.

Speaker Change: <unk>, which is why we provided some potential upside in that guidance.

Understood very helpful. And then are you based on that are you anticipating.

Speaker Change: And with potential.

The reduction in interest rate by the fed should be a boost for the U S economy and global economy for the future quarters into next year.

Speaker Change: Great. Thank you.

Yes, certainly so we were able to achieve price increases in both polyethylene and PVC and export prices.

Speaker Change: Telecom.

Thank you.

Speaker Change: Question.

Speaker Change: So be moving up so we are seeing some stabilization.

Speaker Change: Our next question comes from Bobby.

Speaker Change: Prices and prices are moving up stocking we believe is over than more so is what the global economic conditions look like going forward.

Speaker Change: Yeah at BMO capital market.

Bobby: Hi, Good morning, Albert and John and welcome John Good morning, Good morning Ravi.

Speaker Change: And with potential.

Bobby: Hi can you help break down some of the access areas on your margin expansion.

Speaker Change: Reduction in interest rates by the fed should be a boost for the U S economy and global economy for the future quarters into next year.

Bobby: We are seeing in the hip business.

Speaker Change: Maybe how much of that is driven by our PVC pipe and compounds business and how much in the rest of.

Speaker Change: Great. Thank you.

Bobby: The building box platform.

Speaker Change: Yes, it's a good question and you see that we called out specifically, our siding and trim business in our pipe and fittings business as strong contributors in the quarters results and so those two.

Bill Com: Bill Com.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Our next question comes from Bobby.

Speaker Change: Sub segments of hip were very strong contributors to say siding and trim and our pipe and fittings business made good contributions this quarter.

Speaker Change: Yeah.

Speaker Change: BMO capital market.

Bobby: Hi, Good morning, Albert and John and welcome John Good morning, Good morning, Bonnie.

Bobby: Hi can you help break down some of the access area on your margin expansion that you have.

Speaker Change: And then maybe if you could share your latest views on at Hain here prices are at historic lows clearly good progress late you also sell polyethylene prices.

Bobby: Being in the hip business and.

Speaker Change: And maybe how much of that is driven by our PVC pipe and compounds business and how much in the rest of.

Speaker Change: Building products platform.

Speaker Change: Hi go through in July this was sort of view on both of those.

Speaker Change: Yes, and so as you think about the ethane price as you have seen the average price for ethane has trended lower since the second quarter and while we don't know what the third quarter will average out to be looking at the forward curve ethane does look quite will trend somewhere between 3% to five lower.

Speaker Change: Sub segments of hip were very strong contributors to say siding and trim and our pipe and fittings business Hey, good contributions this quarter.

Speaker Change: If you look at the forecast from many of the consultants on the forward curve for ethane, which would be constructive for our value.

Speaker Change: And then maybe if you could share your latest views on at Hain here prices are at historic lows clearly good progress late you also sell polyethylene prices.

Speaker Change: Hi go through in July this is sort of view on both of those.

Speaker Change: Thank you.

Speaker Change: Our next question.

Michael <unk>: Our next question comes from Michael <unk>.

Speaker Change: <unk> pharma.

Yeah.

Speaker Change: Hey, guys.

Speaker Change: Nice quarter and welcome John Mark and.

Speaker Change: If you look at the forecast from many of the consultants on the forward curve for ethane, which would be constructive for our value.

Speaker Change: I guess my first question when you think about Pam.

Speaker Change: Sequentially into the third and the fourth I think the outlooks for each new margins are kind of.

Speaker Change: Well I guess I guess from the consultants.

Speaker Change: Thank you.

Speaker Change: How do you think the progression there.

Speaker Change: One moment for our next question.

Hit unfold if demand stays around these levels for the SEC.

Speaker Change: Can have.

Speaker Change: Yes, the demand for.

Speaker Change: Our next question comes from Michael.

Speaker Change: Pam partners are pretty stable and I mentioned actually demand for polyethylene PVC being quite good, especially in the export market and we have been able to raise prices on caustic and chlorine.

Speaker Change: Wells Fargo.

Speaker Change: Sure.

Michael: Hey, guys.

Speaker Change: Nice quarter and welcome John Mark and.

Speaker Change: I guess my first question when you think about Pam.

Speaker Change: It is stable.

Speaker Change: And the prices more or less stable, there's a few dollars up or down depending on which quarter. It goes but I think the demand is in the U S, especially.

Speaker Change: Sequentially into the third and before I think the outlook for <unk> margins are are kind of.

Speaker Change: Sluggish I guess from the consultants do you think.

Speaker Change: Stable and said they starting pretty much over its reflecting the true economic economy demand for various products.

How do you think the progression there.

Speaker Change: And fall if demand stays around these levels for the SEC.

Speaker Change: Half.

Speaker Change: Got it and then just a follow up on pipe and fittings sounds like that business continues to show really good strength.

Speaker Change: Demand for.

Speaker Change: And do you think.

Speaker Change: Growth will be as good in the second half and then I was just curious on profitability you have a competitor out there that shows margins.

Speaker Change: And the prices more or less stable of this a few dollars up or down depending on which quarter. It goes.

Speaker Change: Now well above yours.

Speaker Change: Yes.

Speaker Change: And any reason why your profitability would it be sort of similar to theirs.

Speaker Change: But I think the demand is in the U S, especially.

Speaker Change: Stable and said the Destocking is pretty much over.

Speaker Change: Kind of that 50%, 60% range and operating margin.

Speaker Change: Reflecting the true economic economies demand for various products.

Speaker Change: Well, Mike I think when you look at the strength, we're seeing really in the materials that we see in our pipe and fittings business again.

Got it and then just a follow up on pipe and fittings sounds like that business continues to show really good strength.

Speaker Change: Continuing to see really good value really in both the pipe and the <unk> application and we're one of the few players that really are in that integrated pipe and fittings solution business.

Speaker Change: Do you think.

<unk> growth will be as good in the second half and then I was just curious on profitability you have a competitor out there that shows margins.

Speaker Change: Certainly our place really in the large municipal water solutions, both fresh and storm water is a big driver for the value proposition we bring forth.

Speaker Change: While above yours.

Speaker Change: Yes.

Speaker Change: And any reason why your profitability would it be sort of similar to theirs.

Speaker Change: Kind of that 50%, 60% range and operating margin.

Speaker Change: And it really is a focus at driving value for those customers and looking for value for our integrated stakeholders. In this process. So it really is looking to make sure that the solutions that we have both in our pipe and our <unk> solutions provide real value, we get focused really on the value rather than the volume in this business.

Speaker Change: Well, Mike I think when you look at the strength, we're seeing really in the materials that we see in our pipe and fittings business again.

Speaker Change: Thank you.

Speaker Change: Certainly our place really in the large municipal water solutions, both fresh and storm water is a big driver for the value proposition we bring forth.

Speaker Change: Youre welcome.

Speaker Change: Thank you.

Speaker Change: Next question.

Frank niche: Our next question comes from Frank niche.

Speaker Change: Reflects healthy.

Speaker Change: And it really is a focus of driving value for those customers and looking for value for our <unk>.

Frank niche: Thank you and good morning, and let me also add my congrats to John Mark If I could just follow up on that on that last question and answer Albert.

Speaker Change: Integrated stakeholders in this process. So it really is looking to make sure that the solutions that we have both in our pipe and our <unk> solutions provide real value, we get focused really on the value rather than the volume in this business.

Pam: In terms of the stability of demand and Pam.

Speaker Change: And the price increases in the lower raw materials. It sounds as if we're looking at.

Speaker Change: Reading between the lines it sounds as if we're looking at a flat to up third quarter in Pam <unk>.

Speaker Change: Thank you.

Speaker Change: Youre welcome.

Speaker Change: Thank you our next.

Speaker Change: Question.

Speaker Change: Perhaps.

Speaker Change: Somewhat moderated by the Petro one turnaround so just curious if I'm thinking about that in a proper context and or perhaps.

Frank niche: Our next question comes from Frank niche.

Frank niche: Refresh LLC.

Speaker Change: What sort of level of impact do you believe the Petro one turnaround which starts in September will have on <unk> and <unk>.

Frank niche: Thank you and good morning, and let me also add my congrats to John Mark If I could just follow up on that on that last question and answer Albert.

Speaker Change: Yes.

Speaker Change: Suddenly the Petro one turnaround will have some impact but it is a reminder, that westlake as a net buyer of ethylene.

Pam: In terms of the stability of demand and Pam.

Speaker Change: And the price increases in the lower raw materials. It sounds as if we're looking at.

Speaker Change: And even though ethane price has reduced which is great that helps our.

Speaker Change: Reading between the lines it sounds as if we're looking at a flat to up third quarter in Perm.

Speaker Change: $4 7 billion pounds of ethylene capacity, but we're net buyers who are paying high ethylene prices and also we mentioned that we are booking.

Speaker Change: Haps.

Somewhat moderated by the Petro one turnaround so just curious if I'm thinking about that in a proper context and or perhaps.

Speaker Change: Mothballing of our planting in the Netherlands, which also even though it's not a cash out flow in third quarter, we are booking in the third quarter.

Speaker Change: What sort of level of impact do you believe the Petro one turnaround which starts in September will have on <unk> and <unk>.

Speaker Change: So those accounting.

Speaker Change: Costs will impact our third quarter results.

Speaker Change: Yes.

Speaker Change: Suddenly the Petro one turnaround will have some impact but it is a reminder, that westlake as a net buyer of ethylene.

Speaker Change: It's admirable that youre, highlighting the mothballing costs.

Speaker Change: And even though ethane price has reduced which is great. It helps our.

Speaker Change: Since since 99, 9% of companies would put that in and other or restructuring or what have you in <unk>.

Speaker Change: Four 7 billion pounds of ethylene capacity, but we're net buyers who are paying high ethylene prices and also we mentioned that we are booking.

Speaker Change: And strip it out from EBITDA, which I suspect that the street will do on its own in Alberta, If I could just ask you.

Speaker Change: Mothballing of our planting in the Netherlands, which also even though it's not a cash outflow in the third quarter, we're booking in the third quarter.

John Mark: Now John Mark is in place and it obviously will take them a little bit of time to get up the learning curve, how do you view your future involvement.

Within within Westlake over the next year or two.

Speaker Change: So those accounting.

Speaker Change: Costs will impact our third quarter results.

Speaker Change: What sort of level of environment. If you mind me asking that question.

Speaker Change: It's admirable that you are highlighting the mothballing costs.

Speaker Change: Suddenly externally.

Speaker Change: We are going through a transition as Jean Marc mentioned he has been here only a few weeks and even though he is a seasoned vets.

Speaker Change: Since since 99, 9% of companies would put that in and other or restructuring or what have you in <unk>.

Veterans in our business globally, there is still a lot of Westlake nuances.

Speaker Change: And strip it out from EBITDA, which I suspect that the street will do on its own and Albert if I could just ask you.

Speaker Change: He has to understand and also visiting plans visiting customers and so on so forth.

John Mark: Now John Mark is in place and it obviously will take them a little bit of time to get up the learning curve, how do you view your future involvement.

Speaker Change: We have over 100 facilities around the world that he'll be spending some time visiting some other people but.

Albert Chao: Within within Westlake over the next year or two.

Speaker Change: Moving up to the chairman position I will do what my brother has done James.

Albert Chao: What sort of level of environment, if you might be asking that question.

Speaker Change: And tried to follow his first step even though he is still a senior chairman so looking over my shoulder make sure I'm doing a gradual.

Speaker Change: Suddenly externally.

Speaker Change: We are going through a transition as Mark mentioned he has been here only a few weeks and even though he is a seasoned.

Speaker Change: But it's a team effort Westlake is really.

Our team worked together closely.

That trend in our business globally, there is still a lot of Westlake nuances.

And we've done well and Jo Mark.

Speaker Change: He has to understand and also visiting plans visiting customers and so on so forth.

Speaker Change: We will continue that culture that Westlake established over the last 40, almost 40 years.

And it's our goal so I will learn a lot from gel Marc Baumann experienced globally and.

Speaker Change: We have over 100 facilities around the world that he'll be spending some time visiting some other people.

I also learned a lot from you guys.

Speaker Change: But.

Speaker Change: Sure.

Speaker Change: Moving up to the chairman position I will do what my brother has done James.

Speaker Change: A chance to meet you and look forward to.

Speaker Change: Going with shell Marc to lead.

Speaker Change: And tried to follow his first step even though he is still a senior chairman so looking over my shoulder to make sure I'm doing a great job.

Speaker Change: Our key.

Speaker Change: Investors analysts to communicate and to learn from you and to March forward and communicate what.

Speaker Change: But it's a team effort Westlake is really.

Speaker Change: Mark's view of Westlake strategy going forward, which is in line with our his history, but we bring a lot of new ideas and.

Speaker Change: Our team worked together closely.

Speaker Change: And we've done well and Jo Mark we'll continue that culture that Westlake established over the last 40, almost 40 years.

Speaker Change: Insights into our business.

Speaker Change: Terrific. Thank you. Thanks, so much.

Speaker Change: And as I'll go so I will learn a lot from gel Marc Baumann experienced globally and.

Speaker Change: Youre welcome.

Alexia <unk>: Our next question comes from Alexia <unk> framework.

Speaker Change: I also learned a lot from you guys.

Speaker Change: A chance to meet you and look forward to going with gel Marc to lead.

Speaker Change: Okay.

Thank you John Mark wish you best of luck as the CEO and Albert can you tell us how your approach to search for Westlake as a new CEO.

Speaker Change: The key.

Speaker Change: Investors analysts to communicate and to learn from you and to March forward and communicate that.

Speaker Change: <unk> remarks view of Westlake strategy going forward, which is in line with our his history, but we bring a lot of new ideas.

Albert Chao: We have focused on a candidate with building products experience tomorrow.

Speaker Change: Oddity chemicals experience and John marks bio suggest significant experience in international specialty chemicals, So should we read anything into this.

Speaker Change: Insights into our business.

Speaker Change: Terrific. Thank you. Thanks, so much.

Speaker Change: Youre welcome.

Albert Chao: Well, we the board.

Speaker Change: Our next question comes from Alexia <unk> framework at Keybanc.

Speaker Change: And along with James and I and some of our key people.

Albert Chao: <unk> done a very thorough search for the right candidate to be the new CEO is not an easy task as you mentioned, we have a very different portfolio from typical chemical company.

Alexia: Thank you John Mark wish you best of luck as the CEO and Albert can you tell us how your approach to search for Westlake as new CEO.

Could have focused on a candidate was building products experience.

Albert Chao: And also with our global position.

Speaker Change: <unk> experience and John marks bio suggest significant experience in international specialty chemicals.

So we are very glad to find shall mark who has as I mentioned, a tremendous global experience and has a chemical background and.

Speaker Change: Should we read anything into this.

Albert Chao: So I think the Penn study hip business will be a little bit newer to gel Marc but so he has been evolving.

Speaker Change: Well, we the board.

Speaker Change: And along with James and I and some of our key people has done a very thorough search for the right candidate to be the new CEO is not an easy task as you mentioned, we have a very different portfolio from typical chemical company.

Albert Chao: In building homes settled out so he understands the importance of.

Albert Chao: Housing to people around the world and I think this will be a tremendous.

Albert Chao: Driver for demand for chemical products as our homebuilding products as you know.

Speaker Change: And also with our global position.

Speaker Change: Our hip business are primarily North American base.

Shermark: So we're very glad to find share mark.

Shermark: Who has as I mentioned, a tremendous global experience and has a chemical background.

Speaker Change: So we have good technology that we mentioned.

Speaker Change: And we will find opportunities we can apply our technology to other parts of the world.

Shermark: And.

Speaker Change: So I think the Penn study hit business will be a little bit newer to gel Marc but so he has been evolving.

Speaker Change: Thank you Albert and then turning to current business.

Speaker Change: In building homes settled out so he understands the importance of housing to people around the world and I think this will be a tremendous.

Speaker Change #100: The margin upside this year in here.

Speaker Change #101: Are you surprised yourselves or perhaps you can kind of recognize you were too conservative and if you are surprised what do you think was better this year than expected.

Speaker Change: The driver for demand for chemical products as our homebuilding products.

Speaker Change: Our hip business are primarily North American base.

Speaker Change #102: Well the demand we mentioned the volume the volume was strong.

Speaker Change: So we have good technology that we mentioned.

Speaker Change #103: Longer than 2023 is stronger than first quarter of 2024.

Speaker Change: And we will find opportunities we could apply our technology to other parts of the world.

Speaker Change #103: Even though as Steve mentioned, the housing starts projects with bi and Hh B I think it's $1 4 billion units last year projecting $1 3 million units this year.

Speaker Change: Thank you Albert and then turning to current business.

Speaker Change: The margin upside this year in here.

Speaker Change #104: The reduction and we're hearing about the various companies reported on the housing and construction business, but I think going forward, where the fat reduction.

Speaker Change: Are you surprised yourselves or perhaps you can kind of recognize you were too conservative.

Speaker Change: And if you are surprised what do you think was better this year than expected.

Speaker Change #105: Interest rates and tenure.

Speaker Change #105: Just rate has dropped to a three 8% from $4 $4 five or something just a few months ago. It.

Speaker Change: Okay.

Speaker Change: While the demand.

Speaker Change: The volume the volume was strong stronger than 2023 is stronger than first quarter of 2024.

Speaker Change #107: Should we really be very helpful for the housing industry going forward, maybe not right away, but thats the trend that will help not just housing industry helped the U S economy as a whole and that will also help the global economy as a whole with lower interest rate.

Speaker Change: Even though as Steve mentioned the housing starts projects with buy Hh B I think it's $1 4 billion units last year projecting $1 3 million units. This year as a reduction and we're hearing of all of the various comp.

Speaker Change #108: As Steve mentioned, we are positioning ourselves to be ready for it.

Speaker Change #109: But the.

Speaker Change: Companies reported on the housing and construction business, but I think going forward, where the fast reduction.

Steve Bender: Third quarter, usually also has a good quarter from a volume point of view, but fourth quarter will be seasonally slow that's normal and.

Speaker Change: Interest rates and tenure.

Speaker Change: Rates have dropped to a three 8% from $4 $4 five with something just a few months ago.

Steve Bender: So depending on how fast the fed drops rates and the economy in general.

Speaker Change: It should we really be very helpful for the housing industry going forward, maybe not right away, but thats the trend that will help not just how the industry health of the U S economy as a whole and that will also help the global economy as a whole with lower interest rate.

Speaker Change #110: We cannot predict but volume growth so changes will be on a short term, but we believe on a longer term basis. The next several years with lower interest rates should be definitely positive for the U S economy and for our industry.

Albert Chao: Great. Thank you Albert.

Speaker Change: As Steve mentioned, we are positioning ourselves to be ready for it.

Speaker Change #111: Youre welcome.

Speaker Change: But.

Speaker Change: Third quarter, usually also has a good quarter from a volume point of view, but fourth quarter will be seasonally slow that's normal and.

Our next question comes from Josh Spector UBS.

Josh Spector: Yes, hi, good morning, I wanted to go back to the pipes and fittings piece for a moment here I guess I understand the point about value over volume and Thats driving some of the things for Westlake, but I guess when we look at some of the smaller regional players I mean, EBITDA margins and spreads are up very meaningfully Q3 X versus a few years ago. So it's not just.

So depending on how fast the fed drops rates and the economy in general.

Speaker Change: We cannot predict but volume growth so changes will be on a short term, but we believe on a longer term basis. The next several years with low interest rates should be definitely positive for the U S economy and for our industry.

Speaker Change #111: Westlake.

Speaker Change #113: Just curious of your view if you can maybe comment at all on one.

Speaker Change #114: As your pipes and fittings margins <unk>.

Albert Chao: Great. Thank you Albert.

Speaker Change: Youre welcome.

Speaker Change #115: Curiously higher than the hip segment average today versus where it was and then to the sustainability of that pricing and spreads in three has something changed structurally supply wise that would justify a much higher spreads in the downstream part of the business.

Our next question comes from Josh Spector UBS.

Speaker Change #116: Yes, so Josh good question and I think what you've seen US do is really focus really on an integrated solution and what I mean by that is a solution that provides not only pipe, but also things that go with that recent acquisition. We undertook two years ago was the.

Speaker Change: Westlake.

Speaker Change #101: I'm just curious of your view if you can maybe comment at all on one.

Speaker Change #116: So it was a fittings business. This is the Alaska acquisition on referring to where we have not only larger diameter fittings in our portfolio, but this transaction allowed us to fill out that portfolio offering. So what attributes I think the improved value proposition that I think will provide us being able to provide an integrated.

Speaker Change #102: Your pipes and fittings margins.

Speaker Change #103: <unk> higher than the hip segment average today versus where it was and then to the sustainability of that pricing and spreads in three has something changed structurally supply wise that would justify a much higher spreads in the downstream part of the business.

Speaker Change #116: Solution to our customers that is not only providing the the pipes that are necessary, but also the ELD.

Speaker Change #104: Yes, so Josh good question and I think what you've seen US do is really focus really on an integrated solution and what I mean by that is a solution that provides not only pipe, but also things that go with that.

Speaker Change #116: Elbows arms fittings that go with those wide variety of sizes and pipes. So that integrated solution of pipes and fittings is important are the only player that really provides an integrated solution in north America of pipes and fittings and I think whether you are selling it as individual components at a job site or selling it.

Speaker Change #104: Recent acquisition, we undertook two years ago was the.

Speaker Change #104: So it was a fitting business. This is the Alaska acquisition on referring to where we have not only larger diameter fittings in our portfolio, but this transaction allowed us to fill out that portfolio offering. So what attributes I think the improved value proposition that I think we provide is being able to provide an integrator.

Speaker Change #116: As an integrated pipe and fittings solution of job site, that's really where the value proposition I think has come through on top of that you've also seen capital will begin to flow from the infrastructure, Bill, which is adding volume to the business and this business with that added volume certainly provides scale.

Speaker Change #104: <unk> solution to our customers that is not only providing the the pipes that are necessary, but also the.

Elbows arms fittings that go with those wide variety of sizes and pipes, so that integrated solution of pipes and fittings. It's important we're the only player that really provides an integrated solution in North America of pipes and fittings and I think whether you are selling it as individual components at a job site or selling it.

Speaker Change #116: So that allows us to really.

Speaker Change #116: It really drive real value for that pipes and fittings business, which is why we call. It out the last couple of quarters as really value drivers for the results of each quarter.

Speaker Change #117: Okay. Thanks for that but I guess, maybe to follow up is that when I look at peers that are smaller and don't have those advantages reporting margins of 50% 60%.

Speaker Change #104: As an integrated pipe and fitting solution of job site, that's really where the value proposition I think has come through on top of that you've also seen capital will begin to flow from the infrastructure, Bill, which is adding volume to the business and this business with that added volume certainly provides scale.

Speaker Change #118: Not sure. If you can comment on why that would be the case and I guess from my view I'm thinking about it in the context.

Speaker Change #118: At Westlake is over earning to some context, there or if you'd say hey, your margins are much less than that what I. Just said that it gives us some degree of comfort that maybe it's at a more manageable level going forward. Thanks.

Speaker Change #104: So that allows us to really.

Speaker Change #104: It really drive real value for the pipes and fittings business, which is why we call. It out the last couple of quarters as really value drivers for the results of each quarter.

Speaker Change #119: Yes, I can't speak to others margins in the business, that's something that you'd have to have a dialogue with them about what I can say is I believe that the value proposition were providing through the integrated solution of resin PVC resin going into our pipes and solutions. Our long term sustainable. If these are really good margins, we're providing and I don't bill.

Speaker Change #105: Okay. Thanks for that but I guess, maybe to follow up is that when I look at peers that are smaller and don't have those advantages reporting margins of 50% 60%.

Speaker Change #106: Not sure. If you can comment on why that would be the case and I guess from my view I'm thinking about it in the context.

Speaker Change #119: We were over earning in a periods such as this as Albert noted when you take a look at the housing starts were still well below the numbers that we need for the construction activities here in North America, and even if you look at the starts that we've seen even this past quarter about one 3 million starts per the U S census numbers in HD.

Speaker Change #106: At Westlake is over earning to some context, there or if you'd say hey, your margins are much less than that what I. Just said that it gives us some degree of comfort that maybe it's at a more manageable level going forward. Thanks.

Speaker Change #107: Yes, I can't speak to others margins in the business. That's something that you would have to have a dialogue with them about what I can say is I believe that the value proposition were providing through the integrated solution of resin PVC resin going into our pipes and solutions. Our long term sustainable. If these are really good margins, we're providing and I don't bill.

Speaker Change #120: This shows it was trending lower in the by the end of the year, but Nevertheless, I would say, we're not really over earning because I think we're really providing real value both through the building products. The hip side of our business as well as the integrated value, we gave by providing that resin across through our hip segment.

Speaker Change #107: We were over earning in a periods such as this as Albert noted when you take a look at the housing starts were still well below the numbers that we need for the construction activities here in North America, and even if you look at the starts that we've seen even this past quarter about one 3 million starts per the U S census numbers in HP.

Speaker Change #121: Okay. Thanks, Steve.

Speaker Change #121: Okay.

Speaker Change #121: Hmm.

Speaker Change #121: Yeah.

Speaker Change #122: Our next question comes from Hassan Ahmed of Alembic Global Advisors.

Hassan Ahmed: Good morning, Albert and Steve and congratulations John on the on the new role.

Speaker Change #108: Shows it was trending lower in the by the end of the year, but Nevertheless, I would say, we're not really over earning because I think we're really providing real value both through the building products. The hip side of our business as well as the integrated value, we gave by providing that resin across to our hip segment.

Speaker Change #122: Yes.

Hassan Ahmed: First question around just look I mean.

Speaker Change #124: You guys did on an annualized basis, almost 3 billion in EBITDA.

Speaker Change #124: In Q2.

Speaker Change #126: And I, obviously appreciate the comments that Steve just made about how you guys aren't over earning in certain segments.

Speaker Change #109: Okay. Thanks, Steve.

Speaker Change #109: Right.

Speaker Change #109: Sure.

Speaker Change #127: If I were to venture a guess I mean, just looking at the business environment, you guys are well below normal with significant upside to hitting normal business conditions. So now with that said how should we think about this annualized $3 billion number that you just reported.

Speaker Change #109: Yeah.

Speaker Change #110: Our next question comes from Hassan Ahmed of Alembic Global Advisors.

Hassan Ahmed: Good morning, Albert and Steve and congratulations John on the on the new role.

Speaker Change #110: Yes.

Hassan Ahmed: First question around just look I mean.

Speaker Change #128: Relative to where normal earnings should be I mean is there significant upside to that number.

Speaker Change #112: You guys did on an annualized basis, almost $3 billion in EBITDA.

Speaker Change #112: In Q2.

Speaker Change #129: In a normalized business environment.

Speaker Change #114: And I, obviously appreciate the comments that Steve just made about how you guys aren't over earning in certain segments.

Hassan Ahmed: Well Hassan.

Hassan Ahmed: Thank you for the question, but I would say, we certainly still see headwinds and we called out some of the.

Speaker Change #115: If I were to venture a guess I mean, just looking at the business environment, you guys are well below normal with significant upside to hitting normal business conditions. So now with that said how should we think about this annualized $3 billion number that you just reported.

Hassan Ahmed: Indices, the ASM indices, both here in the U S as well as some of our indices in Europe and in Asia, and so while I would say there is significant operating leverage in the business. We certainly certainly are still add points price points well below those we saw in 'twenty three and 'twenty two.

Speaker Change #116: Relative to where normal earnings should be I mean is there significant upside to that number.

Hassan Ahmed: So while we do expect that.

Hassan Ahmed: We're seeing a better supply demand balance given the pricing initiatives, we've seen a number of our Pam products, we're still not to a point, where we're back to those levels of pricing backend 'twenty three and in 2002, but there are certainly there certainly is operating leverage in the perm side of the business.

Speaker Change #117: In a normalized business environment.

Hassan Ahmed: Well Hassan.

Thank you for the question, but I would say, we certainly still see headwinds and we called out some of the.

Speaker Change #130: Understood understood very helpful and as a follow up.

Speaker Change #131: I understand it's the first couple of weeks for John Marc and his new role.

Speaker Change #132: So maybe this is a question both for him and for Steve as well.

Albert Chao: And obviously Albert.

Hassan Ahmed: So while we do expect that.

Speaker Change #133: I'm just trying to get a sense of obviously the portfolio has changed a fair bit over the last couple of years.

Speaker Change #134: As you guys are very well aware of sitting here as analysts one of the things that we're looking for is a valued.

Hassan Ahmed: In 2002, but there are certainly there certainly is operating leverage in the perm side of the business.

Speaker Change #135: Evaluation multiple re rating right. So how sort of as you went through the whole interview process Albert.

Speaker Change #118: Understood understood very helpful and as a follow up.

Speaker Change #135: What was the thought process with regards to that and maybe John Mark can give us.

Speaker Change #119: I understand it.

Speaker Change #119: The first couple of weeks for John Marc and his new role.

John Mark: Sort of high level views with regards to.

Speaker Change #120: So maybe this is a question both for him and for Steve as well.

Speaker Change #136: What are you thinking in terms of potentially getting that valuation re rating and making the market sort of see this portfolio change that that has transpired.

Albert Chao: And obviously Albert.

Speaker Change #121: I'm just trying to get a sense of obviously the portfolio has changed a fair bit over the last couple of years.

John Mark: Yeah, well as you know Hassan that we look at investments that bring risk.

Speaker Change #122: As you guys are very well aware of us sitting here as analysts one of the things that we're looking for is a.

The risk adjusted return above our cost of capital.

Speaker Change #123: Valuation multiple re rating Reg so how sort of as you went through the whole interview process Albert.

Speaker Change #137: And also optimistic on this one.

Speaker Change #138: We want to buy companies or whatever it takes to to to agree on a deal.

Speaker Change #123: What was the thought process with regards to that and maybe John Mark can give us sort of high level views with regards to <unk>.

Speaker Change #139: So, but we have been building.

Speaker Change #140: Hip business segment, and as Steve mentioned that all synergies.

Speaker Change #124: What are you thinking in terms of potentially getting that valuation re rating.

Speaker Change #141: Both from the hip to Perm side as well as within hip so while our cross selling opportunities can come along and we will continue to pursue those opportunities as they arise.

Speaker Change #125: And making the market sort of see this portfolio change that that has transpired.

John Mark: Yeah, well as you know Hassan that we look at investments that bring risk.

Steve Bender: So our job really is to bring value to.

Speaker Change #142: To our investors, how the street see us as multiple.

John Mark: The risk adjusted return above our cost of capital.

Hassan Ahmed: And also optimistic on this.

Uptake or whatever that's out of our control.

Speaker Change #126: When we want to buy companies or whatever it takes to to to agree on a deal.

Speaker Change #142: All we do is bringing sustained return to our shareholders.

Speaker Change #142: And.

Speaker Change #127: But we have been building.

Speaker Change #142: A long term basis, that's the key and not for short term gangs.

Steve: Hip business segment, and as Steve mentioned that all synergies.

Speaker Change #142: And we hope that the market will see the value that we bring but it's out of our control.

Steve: Both from the hip to Perm side as well as within hip so while our cross selling opportunities come along.

Speaker Change #142: Very helpful. Albert Thank you so much.

Steve: And we will continue to pursue those opportunities as they arise.

Albert Chao: Youre welcome.

Steve: So our job really is to bring value to.

Michael <unk>: Our next question comes from Michael <unk>.

Speaker Change #128: To our investors, how the street see us as multiple.

Michael <unk>: At Barclays.

Great. Thanks, Good morning, guys.

Speaker Change #128: Uptake or whatever that's out of our control.

Michael <unk>: Can you speak to your Chlor alkali can you speak to your Chlor alkali operating rates currently I would assume they are running fairly hard just given PVC strengthen integration, but just where are they running today.

Speaker Change #128: All we do is bringing sustained return to our shareholders.

And.

Speaker Change #128: A long term basis, that's the key and not for short term gangs.

Speaker Change #143: Yes, I think the industry. Some other industry players were impacted by the borrow a hurricane.

Speaker Change #128: And we hope that the market will see the value that we bring but it's out of our control.

Speaker Change #144: Not long ago and are recovering from those excellence, but I think as you said.

Speaker Change #128: Very helpful. Albert Thank you so much.

Speaker Change #144: At the operating rates as being.

Albert Chao: Youre welcome.

Speaker Change #145: Very good after the.

Michael <unk>: Our next question comes from Michael <unk> at.

Speaker Change #146: Hurricane and demand for both the PVC and caustic are pretty strong. So it always has been doing very well.

Michael: At Barclays.

Michael <unk>: Great. Thanks, Good morning, guys.

Michael <unk>: Can you speak to your Chlor alkali can you speak to your Chlor alkali operating rates currently I would assume they are running fairly hard just given PVC strength in integration, but just where are they running today.

Speaker Change #145: But it will be.

Speaker Change #146: Turnaround is coming up in the third quarter.

Speaker Change #146: Along various plants.

Speaker Change #147: And we don't know this is.

Speaker Change #147: Still early in the game of August versus Hurricane season, which ends at the end of November.

Speaker Change #130: Yes, I think the industry. Some other industry players were impacted by the Barro Hurricane.

Speaker Change #147: All we are very careful.

About our inventories and production and so on and so forth.

Speaker Change #131: Not long ago and are recovering from those excellence, but I think as you said.

Speaker Change #148: Great and then your hip segment volumes were up 16% in the quarter can you help us better understand what categories are growing faster than that and what categories are growing slower than that and just the clarification is product mix effect reported through price or volume for Westlake.

Speaker Change #132: Operating rates as being.

Speaker Change #133: Very good after the.

Speaker Change #134: Hurricane and demand for both the PVC and caustic are pretty strong. So the rates has been doing very well.

Speaker Change #133: Yeah.

Speaker Change #133: Turnarounds coming up in the third quarter.

Speaker Change #149: Yes, so Mike when you think of that.

Speaker Change #133: Around various plants.

Speaker Change #150: The value contributors here, we certainly see the as I've called out kind of the pipe and fittings in the siding and trim businesses really contributing very well to the hip segment results.

Speaker Change #133: And we don't know still early in the game of August versus Hurricane season, which ends at the end of November. So we are very careful.

Speaker Change #133: About our inventories and production and so on and so forth.

Speaker Change #151: Our windows business is our smallest subsegment within the hip business and so I would say that is the smallest contributor still.

Speaker Change #135: Great and then your hip segment volumes were up 16% in the quarter can you help us better understand what categories are growing faster than that and what categories are growing slower than that and just the clarification is product mix effect reported price or volume for Westlake.

Speaker Change #151: Regional in terms of play it plays in the Texas market and kind of the southeast market. So.

Speaker Change #151: So therefore, probably the weakest contributor in that business, but I would say, we're continuing to see good cross selling which is why you saw the volumes pick up and given the strength I think in the branding that you see in that business I think the cross selling is attributable to the efforts by our hip team to understand and pushed through the <unk>.

Speaker Change #136: Yes, so Mike when you think of.

Speaker Change #137: The value contributors here, we certainly see the as I've called out kind of the pipe and fittings in the siding and trim businesses really contributing very well to the hip segment results.

Speaker Change #151: Brand value that we see in all the product categories that we have so I would say that cross selling with a nice contributing factor to the volume pickup that we saw in the quarter.

Speaker Change #137: Our windows business is our smallest subsegment within the hip business and so I would say that is the smallest contributor still.

Speaker Change #137: Regional in terms of play it plays in the Texas market and kind of the southeast market. So.

Speaker Change #152: Thank you.

Speaker Change #152: Yeah.

Speaker Change #137: So therefore, probably the weakest contributor in that business, but I would say, we're continuing to see good cross selling which is why you saw the volumes pick up and given the strength I think in the branding that you see in that business I think the cross selling is attributable to the efforts by our hip team to understand and pushed through the <unk>.

Speaker Change #152: Our next question comes from our.

Speaker Change #153: This one.

Speaker Change #154: <unk> capital markets.

Speaker Change #155: Alright, Thanks for taking my question and hope you guys are well.

Speaker Change #155: Welcome to manage our market as well.

Speaker Change #155: So I guess.

A couple of questions. So first off it.

Speaker Change #155: In hip.

Speaker Change #158: Obviously, some really strong performance on our pipe and fittings.

Speaker Change #137: Brand value that we see in all the product categories that we have so I would say that cross selling with a nice contributing factor to the volume pickup that we saw in the quarter.

Speaker Change #155: Maybe you can.

Speaker Change #159: Discuss maybe the margin profile there and then also for global compounds and Royal building products, how are those businesses performing and do they have a margin profile, maybe it was less in pipe and fittings in this quarter or higher how would you describe those two businesses. Thanks.

Speaker Change #138: Thank you.

Speaker Change #138: Yeah.

Speaker Change #139: Our next question comes from around this one.

Speaker Change #140: At RBC capital markets.

Speaker Change #159: And so I would say Arun in our compounds business.

Arnab: Alright, Thanks for taking my question and Hope you guys are well and welcome Mark as well.

Speaker Change #160: That is a business that has a pretty stable and steady margin business, but it would be in the middle range of middle to lower range of the range of margins that we see in the hip side of our business I would say that the two sub segments that I mentioned, and which are the pipe and fittings business and our siding and trim businesses are where they are stronger.

Speaker Change #142: So I guess.

Speaker Change #142: Couple of questions. So first off it.

Speaker Change #143: In hip.

Speaker Change #143: Obviously, some really strong performance in our pipe and fittings.

Speaker Change #145: Maybe you can.

Speaker Change #146: Discuss maybe the margin profile there and then also for global compounds and Royal building products.

Speaker Change #160: Performers during the during the quarter and I call those two out in the first quarter as well of consistently stronger performing in that space.

Speaker Change #147: How are those businesses performing and do they have a margin profile, maybe it was less in pipe and fittings in this quarter or higher how would you describe those two businesses. Thanks.

Speaker Change #160: And then in Pam Thanks, Steve and then Pam.

Speaker Change #147: And so I would say Arun in our compounds business.

Pam: Just curious you mentioned some of them flow improvement I guess from polyethylene prices for PVC resin.

Speaker Change #148: That is a business that has a pretty stable and steady margin business, but it would be in the middle range of middle to lower range of the range of margins that we see in the hip side of our business I would say that the two sub segments that I mentioned, and which are the pipe and fittings business and our siding and trim businesses are where they are stronger.

Pam: So that's that's helpful. Do you expect those prices to continue to slowly move higher and what would you say on <unk> and then just curious on the Epocrates side.

Speaker Change #161: You guys took some action do you see some other action and rationalizing assets.

Speaker Change #148: Performers during the during the quarter and I call those two out in the first quarter as well of consistently stronger performing in that space.

Speaker Change #162: Coming forth.

Speaker Change #163: When would that potentially impact market conditions and epoxy.

Pam: And then in Pam.

Speaker Change #164: So <unk>, yes, we certainly have seen strength in a variety of these chemical change I think we you've heard US note that we saw strength really in both PVC as well as in polyethylene in the third quarter as well as in the second quarter.

Pam: And then Pam.

Pam: Just curious you mentioned some slow improvement I guess in polyethylene prices for PVC resin.

Pam: So that's that's helpful. Do you expect those prices to continue to slowly move higher and what would you say on.

Speaker Change #164: So as we as Eric noted in his comments, we continue to see a better balanced market in polyethylene and we saw some price settlements that were.

<unk> and then just curious on the epoxy side.

Speaker Change #149: You guys took some action do you see some other action and rationalizing assets.

Speaker Change #164: Positive and constructive to earnings both in the second and in the third quarter. So far we've also seen the same play out in PVC as you know well the second quarter and third quarter tend to be strong markets for PVC.

Speaker Change #150: Coming forth.

Speaker Change #151: When would that potentially impact market conditions and epoxy.

Speaker Change #152: So <unk>, yes, we certainly have seen strength in a variety of these chemical chains I think you've heard US note that we saw strength really in both PVC as well as in polyethylene in the third quarter as well as in the second quarter. So as we as as Eric noted.

Speaker Change #164: Even though we've seen some headwinds on housing starts certainly the second and third quarter tend to be stronger and therefore strength and demand which pulls on price.

Speaker Change #164: Certainly the actions that we're taking a wide variety of those mothballing, the ECH unit as well as the actions with the European authorities and the U S authorities on this antidumping should all contribute to stronger results in the future for our proxy business. So we look very forward to seeing those actions take hold.

Eric: In his comments, we continue to see a better balanced market in polyethylene and we saw some price settlements that were.

Eric: Positive and constructive to earnings both in the second and in the third quarter. So far we've also seen the same play out in PVC as you know well the second quarter and third quarter tend to be strong markets for PVC.

Speaker Change #164: We deliver a better value.

Speaker Change #165: And just any thoughts on caustic and chlorine.

Eric: Even though we've seen some headwinds on housing starts certainly the second and third quarter tend to be stronger and therefore strength and demand which pulls on price.

Speaker Change #165: As I've mentioned, because as I mentioned before caustic and cooling demand are pretty stable.

Speaker Change #166: Exporting a fair amount of PBC as well as caustic I wish I had a lowest cost energy.

Eric: Certainly the actions that we're taking a wide variety of those mothballing, the ECH unit as well as the actions with the European authorities and the U S authorities on this antidumping should all contribute to stronger results in the future for our proxy business. So we look very forward to seeing those actions take hold.

Speaker Change #165: <unk>.

Speaker Change #165: Our competitive advantage over the rest of the world.

Speaker Change #167: So are the prices being stable as well.

So.

Speaker Change #167: Now I'll call heading into the fourth quarter things will slow down a bit around the world.

Eric: We deliver a better value.

Speaker Change #167: That January 1st quarters are also somewhat weak and then depending on the pardon me in the world The second and third quarter will improve next year.

And just any thoughts on caustic and chlorine.

Eric: As I mentioned this is as I mentioned before caustic and chlorine demand are pretty stable.

Speaker Change #167: Thanks.

Eric: Exporting a fair amount of PBC as well as caustic I wish I had a lowest cost energy.

Speaker Change #167: Our next question comes from Vincent Andrews from Morgan Stanley.

Speaker Change #167: Hi, Thank you for taking my question. This is Turner Hendrix on for Vincent can.

Eric: <unk>.

Our competitive advantage over the rest of the world.

Eric: <unk>.

Turner Hendrix: Can you help us understand what's going on from a cash flow perspective, and what you expect from working capital for the year.

Speaker Change #154: So are the prices being stable as well.

Speaker Change #154: So.

Speaker Change #154: I'll call it heading into the fourth quarter things will slow down a bit around the world.

Speaker Change #167: Yes.

Speaker Change #154: But.

Speaker Change #169: As you saw in the second quarter, we did settle out the litigation charge that we took earlier this year I would expect that with the demands we're seeing really in the activity construction activity in our hip business will continue to have some pull on.

Speaker Change #154: That January 1st quarters are also somewhat weak and then depending on the fall to me in the world The second and third quarter will improve next year.

Speaker Change #154: Thanks.

Speaker Change #154: Our next question comes from Vincent Andrews from Morgan Stanley.

Speaker Change #169: Working capital over the course of the third quarter.

Speaker Change #169: As we go forward.

Hi, Thank you for taking my question. This is Turner Hendrix on for Vincent can.

Speaker Change #170: Certainly prices have trended up in our products and certainly to maintain adequate inventories for our customers that will pull on inventories, but the offset to that is we have seen some lower prices trending you heard my comments earlier about ethane ethane prices are trending lower and so that will be the offset to some of that pick.

Turner Hendrix: Can you help us understand what's going on from a cash flow perspective, and what you expect from working capital for the year.

Yes.

Speaker Change #156: As you saw in the second quarter, we did settle out the litigation charge that we took earlier this year I would expect that with the demands we're seeing really in the activity construction activity in our hip business will continue to have some pull on.

Speaker Change #169: And working capital.

Speaker Change #171: Great Great I appreciate the color there. So hopefully this isn't redundant to the prior question, but in the Chlor alkali part of the business I'm. Just wondering if you could speak further to relative strength or weakness of chlorine versus caustic soda and whether you see pricing upside for either of these products for the balance of the year.

Speaker Change #156: Working capital over the course of the third quarter.

Speaker Change #156: As we go forward.

Speaker Change #157: Certainly prices have trended up in our products and certainly to maintain adequate inventories for our customers that will pull on inventories, but the offset to that is we have seen some lower prices trending you heard my comments earlier about ethane ethane prices are trending lower and so that will be the offset to some of that pick.

Speaker Change #169: Okay.

Speaker Change #172: Yes, I think.

Speaker Change #173: CMA is looking at prices to increasing caustic in the U S by $20 or short term, but coming down in October November.

Speaker Change #174: This year. So it's it's it's kind of a wash.

Speaker Change #156: And working capital.

Speaker Change #158: Great Great I appreciate the color there. So hopefully this isn't redundant to the prior question, but in the Chlor alkali part of the business I'm. Just wondering if you could speak further to relative strength or weakness of chlorine versus caustic soda and whether you see pricing upside for either of these products for the balance of the year.

Speaker Change #174: Uh huh.

Speaker Change #174: Chlorine prices also bumping up and down a little bit.

Speaker Change #174: So I think things are pretty stable and.

Speaker Change #174: Lola calling in the U S goes into PVC as I mentioned that the U S. Also have the PVC prices increased export price again, bumping up or down has trended upwards to a fall in person.

Speaker Change #156: Okay.

Speaker Change #159: Yes, I think.

Speaker Change #160: CMA is looking at prices to increasing caustic in the U S by $20 or short term, but coming down in October November.

Speaker Change #174: Second quarter of this year.

Speaker Change #174: And U S is lowest cost form of ethylene and chlorine point of view to export PVC.

Speaker Change #176: Great. Thank you for the color.

Speaker Change #161: This year. So it's it's it's kind of a wash.

Speaker Change #177: Youre welcome.

Speaker Change #161: Uh huh.

Speaker Change #161: Chlorine prices also bumping up and down a little bit.

Speaker Change #177: Our next question comes from Kevin Mccarthy vertical research partners.

Speaker Change #161: So I think things are pretty stable and.

Kevin Mccarthy: Yes, Thank you and good morning, Albert it's been a pleasure.

Lower corn in the U S goes into PVC as I mentioned <unk> also have the PVC prices increased export price again, bobbing up and down has trended upwards to a fall in person.

Kevin Mccarthy: Absolutely and good morning to Mark look forward to meeting you.

Kevin Mccarthy: I just wanted to clarify on the polyethylene resin price trend. It does sound like you're positive momentum there and my recollection is that producers who are seeking.

Speaker Change #161: Second quarter of this year.

Speaker Change #161: And U S is lowest cost form of ethylene and chlorine point of view to export PVC.

Speaker Change #179: An increase of five a pound for the July contract can you comment on on how much of that.

Great. Thank you for the color.

Speaker Change #180: We were able to realize for LOE and linear low density polyethylene.

Speaker Change #163: Youre welcome.

Speaker Change #181: Yes, the July price has settled with <unk>.

Speaker Change #164: Our next question comes from Kevin Mccarthy vertical research partners.

Speaker Change #181: As the.

Yes, Thank you and good morning, Albert it's been a pleasure.

The industry announced.

Speaker Change #181: And there's potential increases for at least some of the industry players announced the price increases for August October, but time will tell.

Speaker Change #164: Absolutely and good morning to Mark look forward to meeting you.

Kevin Mccarthy: I just wanted to clarify on the polyethylene resin price trend. It does sound like you're positive momentum there and my recollection is that producers who are seeking.

Speaker Change #181: Whether those increases can be.

Speaker Change #181: Effective or not but I think the main reason for that is export price has gone up and.

An increase of five a pound for the July contract can you comment on on how much of that.

Speaker Change #181: <unk> helped to drive up domestic prices, well and demand is pretty pretty stable and as I mentioned, the typically our second and third quarter a strong demand.

Speaker Change #166: We were able to realize for LOE and linear low density polyethylene.

Speaker Change #167: Yes, the July price is settled with <unk>.

Speaker Change #181: Okay.

Speaker Change #181: Quarters for fall.

Prices as well as polyethylene and PVC.

Speaker Change #168: As the.

Speaker Change #168: The industry announced.

Speaker Change #181: So the July settled up five cents a pound.

Speaker Change #168: And there's potential increases for at least some of the industry players announced the price increases for August October, but time will tell.

Speaker Change #181: Perfect and then.

Speaker Change #183: Let me switch gears over to hip certainly very impressive first half of the year with regards to volumes and margins, but I did want to ask.

Speaker Change #168: Whether those increases can be.

Speaker Change #168: Effective or not but I think the.

About point number three on your slide five where.

Speaker Change #168: The main reason for that is export price has gone up.

Speaker Change #184: There you call out kind of a trio of challenges in terms of weather slowdown in starts and also remodeling.

Speaker Change #168: And it helped to drive up domestic prices, well and demand is pretty pretty stable and as I mentioned the <unk>.

Speaker Change #168: Typically second and third quarter, a strong demand.

Speaker Change #185: Can you elaborate on that in the context of seasonality for example.

Speaker Change #168: Okay.

Speaker Change #170: The quarter's work for them.

Speaker Change #170: Prices as well as polyethylene and PVC.

Speaker Change #186: Thinking about those heads.

Speaker Change #170: So the July settled up five cents a pound.

Speaker Change #187: Headwinds do you think that it will result.

Speaker Change #170: Perfect and then.

Speaker Change #188: In the seasonal pattern for 2024, where the first half.

Speaker Change #171: Let me switch gears over to hip certainly very impressive first half of the year with regards to volumes and margins, but I did want to ask.

Speaker Change #189: Is stronger than the second half or be able to overcome that through some of the things that you talked about earlier in the call. How would you think about the way that this year's seasonal cadence is shaping up in him.

Speaker Change #172: Point number three on your slide five where.

Speaker Change #173: You call out kind of a trio of challenges in terms of weather slowdown in starts and also remodeling.

Speaker Change #189: Yeah. So Kevin good question and as you think about the weather patterns. It does have an impact really and really when construction activity. When housing starts actually start and so the reason for the call out really is just an indication that certainly while we see certainly positive trends certainly there there are.

Speaker Change #174: Can you elaborate on that in the context of seasonality for example.

Speaker Change #175: Thinking about those.

Speaker Change #176: Headwinds do you think that it will result.

Speaker Change #176: In the seasonal pattern for 2024, where the first half.

Speaker Change #189: Clear headwinds in some of the headwinds you note there and that is really weather patterns and certainly interest rates remain pretty elevated and so certainly that is creating some of the the concern. We all have as we look into the back half of the year weather patterns continue to be an issue that we have to kind of work through and you know.

Speaker Change #177: Is stronger than the second half or be able to overcome that through some of the things that you talked about earlier in the call. How would you think about the way that this year's seasonal cadence is shaping up in him.

Speaker Change #176: Yeah.

Speaker Change #189: Much of the country, it's been very very warm.

Speaker Change #176: Yeah. So Kevin good question and as you think about the weather patterns. It does have an impact really and really when construction activity. When housing starts actually start and so the reason for the call out really is just an indication that certainly while we see certainly positive trends certainly there are clear headwinds.

And portions of the South and South West.

Speaker Change #189: We've had very very wet weather, which makes it challenging for those housing starts to actually start and pull on the volume demand we see in our building products. So while we continue to see good volumes that we've seen so far in the first half of the year certainly it is just a if you will a watch out for the back half of the year, if we see weather patterns continue to persist it could be.

Speaker Change #178: Some of the headwinds you note there and that is really weather patterns and certainly interest rates remain pretty elevated and so certainly that is creating some of the the concern. We all have as we look into the back half of the year weather patterns continue to be an issue that we have to kind of work through and you know throughout much of the country. It's been very very warm.

Speaker Change #189: <unk> could be challenges, but again when you look at the <unk> numbers for the year. These they forecast housing starts in the fourth quarter and the third quarter and they are somewhat lower than the first half of the year. So they do trend down from the peak that we saw in the first quarter they trend lower in the second quarter in a in HB is trim.

Speaker Change #178: And portions of the South and South West.

Speaker Change #178: We've had very very wet weather, which makes it challenging for those housing starts to actually start and pull on the volume demand we see in our building products. So while we continue to see good volumes that we've seen so far in the first half of the year certainly it is just a if you will a watch out for the back half of the year, if we see weather patterns continue to persist it could be.

Speaker Change #189: In the third and fourth quarter somewhat lower we looked at a variety of the forecasters I'm just calling out in HB, just as an indication of Directionally, where they see their starts going for the rest of this year.

Speaker Change #189: Thank you so much.

Speaker Change #178: Could be challenges, but again with you look at the <unk> numbers for the year. They forecast housing starts in the fourth quarter and the third quarter.

Speaker Change #189: Our next question comes from David Begleiter at Deutsche Bank.

Thank you.

Speaker Change #190: The cost of price increase you mentioned that the CMA has.

Speaker Change #178: And they are somewhat lower than the first half of the year. So they do trend down from the peak that we saw in the first quarter they trend lower in the second quarter and HB is trending third and fourth quarter somewhat lower we looked at a variety of the forecasters I'm, just calling out NIH be just as an indication of directionally, where they see their stock.

Speaker Change #190: And there are estimates.

Speaker Change #191: Is below the proposed increase from you and your competitors.

Speaker Change #192: Do you think CME CMA as being too conservative or do they do you think the market is maybe a little bit weaker than you thought relative to your announced price increases.

Speaker Change #178: It's going for the rest of this year.

Speaker Change #193: Yeah well.

Speaker Change #179: Thank you so much.

Speaker Change #193: We our industry announced price increases.

Speaker Change #194: Supply and demand and negotiated with customers and some are on the quarterly basis, we don't see the price change.

Speaker Change #180: Our next question comes from David Begleiter at Deutsche Bank.

Speaker Change #194: Change right away and some are negotiated some on monthly basis. So all of the prices kind of all over the place.

Speaker Change #180: Thank you.

Speaker Change #182: The cost of price increase you mentioned that the CMA has.

Speaker Change #194:

Speaker Change #182: And there are estimates.

Speaker Change #194: And I guess, the CMA is just maybe the average or something.

Speaker Change #184: Is below the proposed increase from you and your competitors.

Speaker Change #195: They announced.

Speaker Change #185: Do you think CME CMA as being too conservative or do they do you think the market is maybe a little bit weaker than you thought relative to your announced price increases.

Speaker Change #196: It is indication that it's going up going down that's the indication.

Speaker Change #197: Much actually goes through.

Speaker Change #197: Hotel, when we finish depending as mentioned earlier, where they are quarterly monthly or negotiated basis.

Speaker Change #184: Yes.

Speaker Change #184: Yeah.

Speaker Change #186: We our industry announced price increases, but supply and demand and negotiated with customers and some are on a quarterly basis, we don't see the price change.

Albert Chao: Very good and Albert just on the July polyethylene pricing increase of <unk>.

Speaker Change #198: Do you think that's more of a function of hurricane barrel impact or more of a function of balance.

Speaker Change #186: Changed right away and some are negotiated some on monthly basis. So all of the prices kind of all over the place.

Speaker Change #198: Supply demand fundamentals.

Albert Chao: Yes, good question I think.

Speaker Change #186:

Speaker Change #186: And I guess, the CMA is just maybe the average or something.

Albert Chao: Combination suddenly there's some impact from production from barrel, but I think as I mentioned earlier the export prices moved up that is the biggest I think impact our domestic price.

Speaker Change #187: They announced.

Speaker Change #187: It is indication that it's going up going down that's the indication.

Speaker Change #188: Much actually goes through.

Speaker Change #200: <unk> some of the export price saw pretty close domestic price that on a netback basis.

Speaker Change #188: Hotel when we finish depending on as mentioned earlier, where they are quarterly monthly or negotiated basis.

Speaker Change #200: When export price goes up then.

Albert Chao: Very good and Albert just on the July polyethylene price increase of <unk>.

Speaker Change #200: People can export rod and sell domestically, which.

Speaker Change #200: Allows us domestic price move up as well.

Speaker Change #189: Do you think that's more of a function of hurricane barrel impacts or more of a function of balance.

And I mentioned, the hurricane season, coming up and people may want to have some inventory.

Speaker Change #200: So all these factors the impact on the price increase that we just settled in July.

Albert Chao: Supply demand fundamentals.

Albert Chao: Yes, good question I think.

Speaker Change #200: Thank you.

Speaker Change #200: Yeah.

Speaker Change #201: Youre welcome.

Speaker Change #201: Our next question comes from Stephen Byrne with Bank of America Securities.

Albert Chao: Leading some of the export price I'll put it close domestic price that on a netback basis.

Stephen Byrne: Yes. Thank you.

Stephen Byrne: What portion of the 15% sequential volume gain and hip would you attribute to just the seasonality of underlying volume growth.

Albert Chao: When export price goes up then.

Albert Chao: We are looking at export rod and sell domestically, which.

Albert Chao: Allowed us domestic price move up as well.

Albert Chao: And I mentioned, the hurricane season, coming up and people may want to have some inventory.

Stephen Byrne: Versus the portion of that 15% that you think you gained from either your effort to brand or your cross selling initiatives and for the portion that's cross selling.

Albert Chao: So all these factors the impact on the price increase that we just settled in July.

Albert Chao: Thank you.

Albert Chao: Yeah.

Speaker Change #190: Youre welcome.

Speaker Change #190: Okay.

Speaker Change #203: What is it that you're offering the distributor or what's the value proposition to be able to get more shelf space.

Speaker Change #190: Our next question comes from Stephen Byrne with Bank of America Securities.

Stephen Byrne: Yes. Thank you.

Stephen Byrne: What portion of the 15% sequential volume gain and hip would you attribute to just the seasonality of underlying volume growth.

Speaker Change #204: Yes, Dave Good question and I'd say, the greater portion of it really is is the ability to really have <unk>.

Speaker Change #204: Brand recognition and cross selling and while there is certainly is some seasonal uplift from <unk> into <unk>.

Stephen Byrne: Versus the portion of that 15% that you think you gained from either your effort to brand or your cross selling initiatives and through the portion that's cross selling.

Speaker Change #204: That is certainly part of the equation here I'd say a meaningful portion of it really is brand recognition and value recognition and therefore cross selling in that cross selling recognizes the portfolio that the Boro acquisition brought to the table with our distributors as you know that distributor network.

Speaker Change #192: What is it that you're offering the distributor or what's the value proposition to be able to get more shelf space.

Speaker Change #204: Has seen increased consolidation and they really want to have an ability to work with a limited number of producers who can provide the broadest portfolio and offer that good better abreast, good better or best range of product offerings, which we do provide.

Yeah, Steve Good question and I'd say, the greater portion of it really is is the ability to really have.

Speaker Change #192: Brand recognition and cross selling and while there is certainly is some seasonal uplift from <unk> into <unk>.

Speaker Change #192: That is certainly part of the equation here I'd say.

And that increased selling effort that we have now with a broader portfolio offering through these acquisitions and our hip segment provide us the ability to provide.

Speaker Change #192: A meaningful portion of it really is brand recognition and value recognition and therefore cross selling in that cross selling recognizes the portfolio that the Boro acquisition brought to the table with our distributors as you know that distributor network has seen increased consolidation.

Speaker Change #204: <unk> brand name recognition and products that they need and that good better or best portfolio and then allows us to have the ability to service the customer our distributors nationwide and so that takes a little while to really translate since the acquisition of borrow a couple of years ago, but thats, what youre seeing coming through today.

Speaker Change #192: And they really want to have an ability to work with a limited number of producers who can provide the broadest portfolio and offer that good better best good better or best range of product offerings, which we do provide.

Speaker Change #205: And just a question about competitive pricing clearly you would have competitors that don't have.

Speaker Change #192: And that increased selling effort that we have now with a broader portfolio offering through these acquisitions and our hip segment provide us the ability to provide the brand name recognition and products that they need and that good better or best portfolio and then allows us to have the ability to service the customer our distributors.

Speaker Change #205: The brand royalty that you have.

Speaker Change #206: Volumes could be challenging for many are you seeing competitive pricing and hip from your from your smaller competitors.

Speaker Change #207: <unk> do you see yourself, having some.

Speaker Change #208: Some defensiveness against that because of your brand loyalty.

Speaker Change #192: And so that takes a little while to really translate since the acquisition of borrow a couple of years ago, but thats, what youre seeing coming through today.

Speaker Change #209: Of course, we have to be competitive in our pricing across all markets and I would say in the building products market. These are smaller these are markets, where you can't transport product nationwide. So if you're talking about concrete roof tiles. It is a market that is a subset of our nationwide market these might be markets in.

And just a question about competitive pricing clearly you would have competitors that donor house.

Speaker Change #193: The brand royalty that you have.

Speaker Change #194: Volumes could be challenging for many are you seeing competitive pricing and hip from your from your smaller competitors.

Speaker Change #209: Maybe a 500 mile radius, where you can't transport that product. So of course, you have to be competitive in those markets and each market has strengths and weaknesses, depending on the construction activity, whether we're talking that California market, the Texas market or the Florida market. Each one of those markets are unique and we have to be competitive in each one of those markets and.

Speaker Change #195: <unk> do you see yourself having.

Speaker Change #196: Some defensiveness against that because of your brand loyalty.

Speaker Change #197: Of course, we have to be competitive in our pricing across all markets and I would say in the building products market. These are a smaller these are markets, where you can't transport product nationwide. So if you're talking about concrete roof tiles. It is a market that is a subset of our nationwide market these might be markets in.

Speaker Change #210: <unk> with <unk>.

Speaker Change #210: Smaller or larger competitors as we face them.

Speaker Change #211: Thank you.

Speaker Change #211: Youre welcome.

Speaker Change #211: Our last question comes from Jeff Zekauskas.

Jeff Zekauskas: At Jpmorgan.

Maybe a 500 mile radius, where you can't transport that product. So of course, you have to be competitive in those markets and each market has strengths and weaknesses, depending on the construction activity, whether we're talking the California market, the Texas market or the Florida market. Each one of those markets are unique and we have to be competitive in each one of those markets in <unk>.

Hi, Thanks very much.

What was the PVC contract settlement for July.

Jeff Zekauskas: PVC.

Speaker Change #213: I think settled at.

Speaker Change #214: Half a penny a pound.

Speaker Change #214: And then would you lie.

Speaker Change #197: Deal with <unk>.

Speaker Change #215: Yes, thank you very much.

Speaker Change #197: Smaller or larger competitors as we face them.

Speaker Change #214: And then the alpha.

Speaker Change #214: Yes.

Speaker Change #216: Do you have a view of the Chinese PVC market.

Speaker Change #197: Thank you.

Speaker Change #198: Youre welcome.

Speaker Change #216: I'm here over a longer period of time.

Speaker Change #198: Our last question comes from Jeff.

Speaker Change #216: Do you think the Chinese market has gone through a period of overbuilding, and then weakness and continued weakness.

Jeff: At Jpmorgan.

Hi, Thanks very much.

Speaker Change #200: What was the PVC contract settlement for July.

Speaker Change #216: Or do you think that there is room for that market to accelerate over the next two or three years.

Jeff: PVC.

Speaker Change #218: Yes, that's a good question.

Speaker Change #201: I think settled at.

Speaker Change #201: Half a penny a pound.

Speaker Change #219: I think the Chinese PVC.

Speaker Change #201: All right.

Speaker Change #219: So industry.

Speaker Change #204: And then would you lie on yes, thank you very much.

Going through a transition.

In the past.

Albert Chao: And then Albert yes.

Speaker Change #219: Many years comp.

Speaker Change #205: Do you have a view of the Chinese PVC market from here over a longer period of time do you think the Chinese market has gone through a period of overbuilding, and then weakness and continued weakness.

Speaker Change #219: <unk> was about 80% of the capacity in China.

Speaker Change #219: And now carbide PVC has dropped to about 70 odd percent. So the more ethylene based PVC plant and build.

Speaker Change #219: I think that trend will continue to face all the high energy and polluting carbide based PVC as well as they have the mercury catalyst issue, we know that.

Albert Chao: Or do you think that there is room for that market to accelerate over the next two or three years.

Speaker Change #206: Yes, that's a good question I think the Chinese PVC.

Speaker Change #219: New gold based catalyst, which is both more expensive.

Speaker Change #206: Business or industry.

Speaker Change #219: But it can also replace.

Speaker Change #208: Going through a transition.

Speaker Change #208: In the past several years.

Speaker Change #219: The Mercury based carefully but still has the carbide based process.

Speaker Change #209: PVC was about 80% of the capacity in China.

Speaker Change #219: So I think.

Speaker Change #219: Over time, the Chinese industry, PVC industry with Wolfe toward ethylene based which will lose its competitive advantage.

Speaker Change #209: And now carbide PVC has dropped to about 70 odd percent. So the more ethylene based PVC plants being built.

Speaker Change #219: The wildcard that base at the Gulf, China at all coal there.

Speaker Change #219: They are cheap and it can make PVC cheaply on carbide, it's a switch to ethylene and most of the ethylene in China now.

Speaker Change #209: And I think that trend will continue to face all the high energy and polluting carbide based PVC as well as they have the mercury catalyst issue, we know that.

Speaker Change #219: That base oil base, which is less competitive with U S base.

Speaker Change #209: New gold based catalyst, which is both more expensive.

Speaker Change #220: Ethane based natural gas based ethylene.

Speaker Change #220: So we'll see how fast the Chinese PVC industry morph into more ethylene based and what kind of pricing will be but even though China. We all know that they have.

Speaker Change #209: But it can also replace.

Speaker Change #209: The Mercury based carefully but still it's a carbide based process. So.

Speaker Change #209: So I think.

Speaker Change #209: Over time, the Chinese industry, PVC industry with Wolfe toward ethylene based which will lose its competitive advantage.

Speaker Change #220: Economic structural problem.

Speaker Change #220: Problem pushing housing housing is still a huge.

Speaker Change #220: Market business for the Chinese economy, and a day.

Speaker Change #209: The wildcard that base at the Gulf China at all coal.

Speaker Change #209: And it can make PVC cheaply carbide, if they switch.

Speaker Change #220: And is still huge for low income housing, but the government is trying to.

Speaker Change #209: Switch to ethylene and most of the ethylene in China.

Speaker Change #220: Do more of the low income housing, but still they go every housing the heat power water electricity.

Speaker Change #209: Naphtha base oil base, which is less competitive with U S base.

Speaker Change #221: And PTC will be a very important and also window frames in China's <unk> PVC window frames, so PVC will be very important comp.

Speaker Change #209: Ethane based natural gas based ethylene.

Speaker Change #209: So we'll see how fast the Chinese PV industry morph into more ethylene based.

Speaker Change #221: Component of the housing demand in China.

Speaker Change #209: The pricing will be but even though China, we all know that they have.

Speaker Change #221: Going forward.

Speaker Change #221: Okay. Thank you so much.

Speaker Change #209: Economic structural.

Speaker Change #222: Youre welcome.

Speaker Change #209: Problem, especially in housing housing is still a huge.

Speaker Change #222: Thank you.

Speaker Change #222: This concludes our question and answer session I would now like to turn it back to Jeff Miller for closing remarks.

Speaker Change #209: Market business for the Chinese economy, and the demand is still huge for low income housing, but the government is trying to.

Thank you again for participating in today's call. We hope you will join US again for our next conference call to discuss our third quarter results.

Speaker Change #209: Do more of the low income housing, but still.

Speaker Change #210: Housing the heat power water electricity.

Speaker Change #211: And PVC it'll be a very important and also window frames and China is all PVC window frames, so PVC will be very important.

Speaker Change #222: Thank you for participating today's Wednesday conference call. As a reminder, this call will be available for replay beginning two hours. After the call has ended.

Speaker Change #210: Poland of the housing demand in China.

Speaker Change #210: Going forward.

Speaker Change #222: The replay can be accessed to the Olympics.

Speaker Change #211: Okay. Thank you so much.

Speaker Change #222: Yeah.

Speaker Change #213: Youre welcome.

Okay.

Speaker Change #212: Thank you.

Speaker Change #213: This concludes our question and answer session.

Speaker Change #213: Now, let me turn it back to Jeff Miller for closing remarks.

Thank you again for participating in today's call. We hope you will join US again for our next conference call to discuss our third quarter results.

Speaker Change #213: Thank you for participating in today's Wednesday conference call. As a reminder, this call will be available for replay beginning two hours. After the call has ended.

Speaker Change #213: The replay can be accessed to the Olympics.

Speaker Change #213: Yeah.

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Speaker Change #216: Good morning, ladies and gentlemen, thank you for standing by.

Speaker Change #217: The Westlake Corporation second quarter 2024 earnings Conference call Sharon's presentation, all participants will be listen only.

Speaker Change #216: Only mode.

After the Speakers' remarks, you will be invited to participate in a question and answer session.

Speaker Change #218: A reminder, ladies and gentlemen, this conference is being recorded today August six 2024, I will now turn the call over to your host John Taylor Wesley Vice.

Vice President and Treasurer, Sir you may begin.

Speaker Change #219: Thank you good morning, everyone and welcome to the Westlake Corporation Conference call to discuss our second quarter 2024 results.

Speaker Change #220: Im joined today by Albert Chao, Our executive Chairman, John Mark Wilson, 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 in our central materials, which we refer to as Pam where materials.

Speaker Change #220: Housing and infrastructure products, which we refer to as hip where products.

Speaker Change #221: Today's conference call will begin with Albert and John Mark who will open with a few comments regarding Westlake performance. Steve will then discuss our financial and operating results after which Albert will add a few concluding comments and we will open up the call 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.

Speaker Change #221: These forward looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. These risks and uncertainties are discussed in Westlake Form 10-K for the year ended December 31, 2023, and other SEC filings.

Speaker Change #221: 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.

Speaker Change #222: This morning, Westlake issued a press release with details of our second quarter results. This document is available in the press release section of our website at Westlake Dot com.

Speaker Change #222: We have also included an earnings presentation, which can be found on the Investor Relations section of our website.

Speaker Change #222: A replay of todays calls will be available beginning today two hours following the conclusion of this call. This.

Speaker Change #222: This replay may be accessed via Westlake website.

Speaker Change #222: Please note that information reported on this call speaks only as of today August 6th 2024, and therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay.

Speaker Change #222: 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 Dot com.

Speaker Change #222: Now I'd like to turn the call over to Albert Chao Albert Thank.

Albert Chao: Thank you Joe Good morning, everyone. We appreciate you joining us to discuss our second quarter 2024 results.

Speaker Change #223: I am pleased to announce that we reported record quarterly results for our hip segment in the second quarter of $2 24.

Speaker Change #223: Which contributed to year over year companywide earnings growth this quarter.

Speaker Change #223: We achieved this despite the slower than expected global macroeconomic recovery.

Speaker Change #223: All in the downturn in macroeconomic conditions that began in the second half of 2022.

Speaker Change #224: And the average annual rate of housing starts through June 2024 below the average for 2023.

Speaker Change #224: For the second quarter of 2024.

Speaker Change #224: We reported net sales of $3 2 billion EBITDA of $744 million.

Speaker Change #224: Net income of $313 million or $2 40 per share.

Speaker Change #224: Which will each an improvement from the second quarter of 2023.

Speaker Change #224: As we benefited from higher volumes across the board.

Speaker Change #224: Hip segment.

Speaker Change #224: Led by pipe fittings, and sidings and trim.

Speaker Change #224: And also higher volumes across our materials portfolio and pen.

Speaker Change #224: Set by PVC resin and caustic soda.

Speaker Change #224: Yeah.

Speaker Change #224: Average sales price in both segments was lower year over year in the second quarter.

Speaker Change #224: Primarily due to the decline in PVC resin caustic soda and pipe and fitting prices that occurred last year.

Speaker Change #224: On a sequential basis.

Speaker Change #224: Volume rose by 15% driven.

Speaker Change #224: Driven by seasonal increases in demand and product cross selling with stable average sales price.

Speaker Change #224: Volume gains sequentially in <unk>, 1%.

Speaker Change #224: Our average sales price rose 4%.

Speaker Change #224: For <unk>. This was the first sequential increase in average sales price since the destocking cycle that we experienced last year.

Speaker Change #224: During the quarter.

Speaker Change #224: We continue to see the benefits of our vertical integration strategy.

Speaker Change #224: As strong demand for pipe and fittings and siding and trim in the hip segment.

Speaker Change #224: Helped drive PVC sales volumes, improving pin PVC sales mix and margins.

Speaker Change #224: Because we are able to ship sales volumes from less attractive export markets.

Speaker Change #224: We also saw continued benefits from our portfolio diversification strategy during the quarter.

Speaker Change #224: It's a slow recovery in Perm margins and earnings.

Speaker Change #224: Due to continued weak global industrial demand.

Speaker Change #224: Were supported by solid earnings growth and margin expansion.

Speaker Change #224: From growth in residential housing construction and infrastructure bill related spending.

Speaker Change #224: Overall, we're very pleased with performance of both of our segments and the integration benefits of our portfolio of businesses.

Speaker Change #224: And the value of this strategy delivers to Westlake and our investors.

Speaker Change #225: We are happy to welcome Joe Mara Gilson to Westlake team with the appointment as our new President and CEO.

Speaker Change #226: A seasoned industry leader with a proven track record of delivering sustained financial performance.

Speaker Change #226: With leadership roles in the U S Europe and Asia.

Speaker Change #226: Most recently as president and CEO of Mitsubishi Chemical group.

Speaker Change #227: Joe Mark's appointment is the culmination of a thoughtful succession plan.

Speaker Change #227: That ensures the continuation of our strategy to create long term value for our shareholders.

Speaker Change #227: I would now like to turn the call over to Joe Mark to provide some initial thoughts Joe Mark.

Joe Mark: Thank you Albert and good morning, everyone.

Joe Mark: It's a pleasure to join Westlake at such an exciting time in the company's history.

Joe Mark: While I am new to the company I've been around the chemical industry for many decades in a very.

Speaker Change #228: Alrighty of leadership roles.

Speaker Change #229: And I have long admired Westlake focus on safe.

Speaker Change #229: And reliable low cost operation.

Speaker Change #229: And environmental stewardship.

Speaker Change #229: I also recognize that shareholders value Westlake history of profitable growth through disciplined investments to create long term value.

Speaker Change #229: Since founding Westlake nearly 40 years ago.

Speaker Change #230: Albert and James.

Speaker Change #230: Along with the rest of the board and leadership team.

Speaker Change #230: If created an incredible company.

Speaker Change #230: That improves the lives of so many people.

Speaker Change #230: Around the world.

Speaker Change #230: And thus, it's an honor to be given the privilege.

Speaker Change #231: To build upon such a successful foundation.

Speaker Change #232: While I have only been at the company for a few weeks.

Speaker Change #232: I've had the opportunity to meet many of my coworkers.

Speaker Change #232: And I wanted to share with you some initial thoughts.

Speaker Change #232: First.

Speaker Change #232: I look forward to building on the successful strategy and focus on driving value for our customers.

And shareholders.

Second.

Speaker Change #232: The current portfolio is a great mix.

Speaker Change #232: Globally cost advantage materials and Ben.

Speaker Change #232: And innovative differentiated products with strong brands in hip.

Speaker Change #232: Third.

Speaker Change #232: I think both segments.

Speaker Change #232: Complement each other synergistically.

As demonstrated by the solid second quarter financial results.

Speaker Change #232: That we reported today.

Speaker Change #232: And I think that there is a solid runway to continue to grow the company in these two verticals for the foreseeable future.

Speaker Change #232: I look forward to sharing more thoughts with all of you in the near future.

Speaker Change #232: I would now like to turn our call over to Steve to provide more detail on our financial results for the second quarter Steve.

Steve: Thank you very much mark and welcome to Westwood and good morning, everyone.

Steve: Westlake reported net income of $313 million or $2 40 per share in the second quarter on sales of $3 2 billion.

Speaker Change #233: Net income for the second quarter of 2024 increased $16 million from the second quarter of 2023, primarily due to higher sales volumes for all of our product lines and our hip segment, particularly for pipe and fittings siding and trim.

Speaker Change #233: When compared to the first quarter of 2024 net income increased by $139 million in the second quarter driven by an increase in demand from a seasonal pickup in construction activity cross selling in the hip segment and.

Speaker Change #233: And higher average sales price in our Perm segment, particularly for PVC resin and polyethylene, reflecting some improvement in the supply demand picture as the global markets slowly recover.

Speaker Change #233: During the second quarter, and we continue to make progress on our companywide cost savings initiatives with approximately $50 million of savings delivered during the second quarter.

Speaker Change #233: These savings combined with those achieved in the first quarter total approximately $85 million of long term cost reductions in the first half of 2024 towards our full year target of $125 million to $150 million.

Speaker Change #233: These efforts build on the $110 million of cost reductions that we delivered in 2023 as we continue our focus on capturing acquisition synergies and improving our reliable cost effective business model.

For the second quarter of 2024, our utilization of the FIFO method of accounting resulted in a favorable pre tax impact of $12 million compared to what earnings would have been reported on the LIFO method. This is only an estimate and has not been audited.

Speaker Change #233: Before I discuss the details of our segment results I want to provide some high level thoughts on the quarter.

Speaker Change #233: In the second quarter of 2024 weeks, we saw a continuation of the market trends that we experienced in the first quarter, including building products demand growth driving sequential sales volume improvement by 15% and modest improvement in demand for materials in our <unk> segment, which supported the improvement in <unk>.

Speaker Change #233: <unk> average sales price of 4% during the second quarter.

These trends combined with our cost cutting and synergy attainment efforts drove record quarterly EBITDA of $336 million and record quarterly EBITDA margins, 28% and our hip segment.

Speaker Change #233: An improvement in our EBITDA margin to 19% from 13% in the first quarter.

Speaker Change #233: Notably the record hip results are occurring against a backdrop of historically lower levels of resident residential construction activity.

Speaker Change #233: That necessarily as necessary to meet society's needs for housing and elevated mortgage rates.

Speaker Change #233: This is a testament to our positioning in the market and margin improvement efforts.

Speaker Change #233: Combined the solid growth in hip and progress towards margin recovery in Perm drove a return to year over year quarterly earnings growth for Westway. Despite the current global microeconomic conditions.

Speaker Change #233: Moving to the specifics of our segment performance.

Speaker Change #233: Housing and infrastructure products segment produced record EBITDA of $336 million on $1 $2 billion of sales.

Speaker Change #233: EBITDA increased $92 million year over year due to a solid 16% increase in sales volumes, particularly for pipe and fittings and siding and trim and.

Speaker Change #233: In addition to the sales volume growth and earnings improvement were supported by lower material costs compared to the prior year period, an acquisition synergy and cost cutting benefits.

Speaker Change #233: When compared to the first quarter of 2024 hit segment sales of $1 2 billion rose by $150 million driven by a 15% sequential increase in sales volumes and stable average sales prices.

Speaker Change #233: Housing product sales of $1 billion in the first quarter increased 15% due to solid sales volume growth in each major product category <unk>.

Speaker Change #233: Infrastructure product sales of $184 million in the second quarter increased 12% from the first quarter of 2024, primarily due to higher demand for larger diameter municipal pipe for water applications.

Speaker Change #233: Hips EBITA margin of 28% set a new quarterly record and the margin expansion from 22% in the prior year period, primarily due to higher sales volumes and lower material costs, while the sequential improvement from 25% in the first quarter of 2024 was primarily due.

Speaker Change #233: Due to higher sales volume.

Speaker Change #233: Moving to our <unk> segment second quarter EBITDA of $391 million was lower than the second quarter of 2023, EBITDA of $435 million due to lower average selling prices, particularly for caustic soda and PVC and epoxy resins.

Speaker Change #233: Although our sales prices drove a year over year decline in EBITDA, our sales volumes in all product categories in our <unk> segment saw improved customer demand compared to the second quarter of 2023, resulting in 11% increase in sales volume.

Speaker Change #233: On a sequential basis <unk> segment EBITA of $391 million in the second quarter increased by $138 million from the first quarter of 2024 and result of higher average sales price, primarily driven by higher prices for PVC resin and polyethylene.

Speaker Change #233: While we are pleased with the progress that <unk> has made in recovering margins for most of its products profitability in our European <unk> business remains challenged and.

Speaker Change #233: In part due to the adverse impact low priced import competition.

Speaker Change #233: A result, and after careful consulted consolidation with key stakeholders.

Speaker Change #233: Last week, we announced plans to temporarily cease operations in mothball, our <unk> unit in the Netherlands to improve the profitability of our proxy business.

Speaker Change #233: We expect to incur pre tax cost of approximately 80 million euros related to the mark borrowing of the unit.

Speaker Change #233: Substantially all of those costs expected to be recorded in the third quarter of 2024 with cash outflows expected to occur over several years starting in 2025.

Speaker Change #233: We expect these actions will materially improve the financial performance of our European epoxy business without having any impact on our customers.

Speaker Change #233: Our U S. A policy Antidumping case continues to progress with an expectation that provisional duties will be set sometime later this year.

Speaker Change #233: Likewise, the European Union has launched a similar antidumping investigation.

Speaker Change #234: Lastly believes in free and fair trade and thus the antidumping investigations and the potential duties to be applied along with our proactive actions in Europe, we believe will level, the competitive markets and restore our <unk> business to profitability.

Speaker Change #234: Shifting to our balance sheet.

Speaker Change #235: As of June 32024, cash and cash equivalents were $3 billion in total debt was $4 9 billion with a staggered long term fixed rate debt maturity schedule, including $300 million of maturing debt that we expect to retire in the third quarter of 2020 for using our strong liquidity.

Speaker Change #235: For the second quarter of 2024 net cash provided by operating activities of $237 million included the cash payment of the litigation charge, we took in the fourth quarter of 2023.

Speaker Change #235: Our cash generative business model provides us with a platform to deploy our balance sheet strategically in order to create long term value for stakeholders.

Speaker Change #236: Now let me provide some guidance for your models.

Speaker Change #237: Based on our current view of demand and prices. We continue to expect 2020 for revenue in our housing and infrastructure products segment to be to be between four three and $4 6 billion.

Speaker Change #237: With possible upside beyond our EBITDA margin guidance of 22%.

We continue to expect our total capital expenditures to be approximately $1 billion, which is similar to our depreciation and amortization run rate.

Speaker Change #237: As a reminder, this includes cost to a planned turnaround at our Petro one ethylene unit scheduled to begin next month that is projected to last approximately 60 days.

Speaker Change #237: We continue to target $125 million to $150 million of companywide cost savings in 2024.

Speaker Change #237: With approximately $85 million already achieved in the first half of this year, including $50 million in the second quarter.

Speaker Change #237: For the full year of 2024, we expect our effective tax rate to be approximately 23% and we expect cash interest expense to be approximately $160 million.

Speaker Change #237: Now I'd like to turn the call over to Albert to provide our current outlook for our business Albert.

Albert Chao: Thank you Steve.

Albert Chao: Overall, we are pleased with the performance in the second quarter of 2024.

Albert Chao: Despite the challenging macroeconomic environment.

Albert Chao: As we look ahead to the remainder of the year.

Speaker Change #238: We remain cautiously optimistic.

Speaker Change #238: And we will continue to manage our production and inventory levels to customer demand.

Speaker Change #238: While order books remain solid.

Speaker Change #238: Unusually wet and hard weather conditions in many parts of North America.

Speaker Change #238: Combined with the recent slowdown in U S housing starts and remodeling activity.

Speaker Change #238: Could have an impact on our sales volume in the second half of 2024.

Speaker Change #238: <unk> is in the U S and Europe slipped during the second quarter.

Speaker Change #238: While similar metrics in China also reflect slowing conditions.

Speaker Change #238: Which could translate into a slowing demand for some of our <unk> products.

Speaker Change #238: Overall.

Speaker Change #238: While the pace of global economic growth remains unclear.

Speaker Change #238: We're encouraged by the trend of solid year over year volume growth in hip.

Speaker Change #238: In volume and margin recovery in <unk>.

Speaker Change #238: Delivered in the second quarter of 2024.

Speaker Change #238: As we look beyond this year, we expect each of our segments to continue to improve.

Speaker Change #238: As for the <unk>.

Speaker Change #238: <unk> hip teaching event.

Speaker Change #238: We expect hip sales to organically grow at a 5% to 7% long term compound annual rate.

Speaker Change #238: With a large pool of attractive inorganic growth opportunities.

Speaker Change #238: We expect this growth to be supported by the structural under supply of homes in North America.

Speaker Change #238: An aging housing stock.

And spending related to the infrastructure.

Speaker Change #239: Job set.

Speaker Change #238: We will continue to invest in our brands.

Speaker Change #238: Capabilities and our people.

Speaker Change #238: To continue creating value over the cycle for investors.

Speaker Change #238: Turning to <unk>, we remain positive on the outlook for long term growth.

Speaker Change #238: Driven by increasing global consumer activity and demand for clean water electrification housing transportation and renewable energy.

Speaker Change #238: Favorable demographic demographic trends.

Speaker Change #238: New product innovations, including our sustainability offerings.

Speaker Change #238: We expect these trends to support a better balance between global supply and demand for our products in our <unk> segment.

Speaker Change #238: With our strong focus on our cost structure and productivity, we are well positioned to leverage volume growth when market returns to normalized growth rates.

Speaker Change #238: Turning to our balance sheet.

Speaker Change #238: Continue to look for opportunities to put our $3 billion cash balance to work in a disciplined manner that will create long term value for our shareholders.

Speaker Change #238: This includes both identifying acquisition candidates.

Speaker Change #238: Seed our risk adjusted cost of capital.

Speaker Change #238: And returning cash to shareholders through both dividends and share repurchases.

Speaker Change #238: Finally.

Speaker Change #238: We continue to advance our sustainability efforts.

Speaker Change #238: During the second quarter adoptions, our innovations to address customers' sustainability requirements increased.

Speaker Change #238: Including significant growth.

Speaker Change #238: In our PVC pipe Green Bean PVC resin and.

Speaker Change #238: And pivotal post consumer resin for flexible polyethylene packaging.

Speaker Change #238: The market reception for our PVC pipe products has been strong and.

And thus, we announced plans to expand our capacity with a new plant in Wichita Falls, Texas site.

Speaker Change #238: To meet growing customer demand.

Speaker Change #238: As a reminder, we launched PV steel pipe in North America in 2021.

Speaker Change #238: And we have seen strong customer appreciation, while PVC or sustainability attributes things.

Speaker Change #238: Since they are lighter weight easier to install can provide increased performance compared to standard PVC pipe.

Speaker Change #238: Looking forward we.

Speaker Change #238: We will continue to invest appropriately to bring new products like <unk> to the market.

Speaker Change #238: <unk> our production capabilities.

Speaker Change #238: For existing products.

Speaker Change #238: To help our customers address their sustainability needs.

Speaker Change #238: Thank you very much for listening to our second quarter earnings call I will now turn the call back over to Joan Thank you Albert.

Joan: Before we begin taking questions I would 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.

Speaker Change #240: Just wonder we will now take questions.

Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question. Please press star one on your channel.

Speaker Change #240: And with that Youre going to be announce to withdraw your question. Please press star one again.

Speaker Change #241: Please standby, while we compile the Q&A roster.

Speaker Change #241: Our first question comes from Patrick Cunningham at Citi.

Patrick Cunningham: Hi, good morning, and congratulations and welcome to John Mark.

Speaker Change #242: Yeah, Good morning, Patrick and yes, as we think about the outlook for the hip segment strong results this quarter and our guidance really was to.

Speaker Change #243: To see that there is potential upside to the guidance of 22% that we've provided we've seen increases in materials cost and PVC resin and we continue to think that that will continue to be.

Speaker Change #243: A reasonable level of construction activity, we've seen the guidance from a number of research firms like NIH be and others that show housing starts could decline later this year and so as we think about that we still think the cross selling and the capability to continue to push forward and value propositions for our products.

Speaker Change #243: <unk>, which is why we provided some potential upside in that guidance.

Speaker Change #244: Understood very helpful. And then are you based on that are you anticipating.

Any sequential improvement in the <unk> segment I know you cited some industrial softness there, but it looks like there should be continued pricing strength in polyethylene and PVC. So what should we expect in terms of the perm segments sequentially.

Speaker Change #245: Yes, certainly so we were able to achieve price increases in both polyethylene and PVC and export prices is also be moving up so we are seeing some stabilization.

Speaker Change #245: Prices and prices are moving up to the stocking. We believe is over than more so is what the global economic conditions look like going forward and with potential.

Speaker Change #245: Reduction in interest rates by the fed should be a boost for the U S economy and global economy for the future quarters into next year.

Speaker Change #245: Great. Thank you.

Bill Com: Bill Com.

Speaker Change #246: Thank you our next question.

Speaker Change #246: Our next question comes from Bobby.

Speaker Change #246: Yeah.

Speaker Change #247: <unk> capital market.

Bobby: Hi, Good morning, Albert and John and welcome John Good morning, Good morning Ravi.

Bobby: Hi can you help break down some of the success areas on your margin expansion that you are seeing in the hip business.

Bobby: And maybe how much of that is driven by our PVC pipe and compounds business and how much in the rest of the building box platform.

Speaker Change #248: Yes, it's a good question and you see that we called out specifically, our siding and trim business in our pipe and fittings business as strong contributors in the quarters results and so those two.

Speaker Change #248: Sub segments of hip were very strong contributors to say siding and trim and our pipe and fittings business Hey, good contributions this quarter.

Speaker Change #248: Okay.

Speaker Change #249: And then maybe if you could share your latest views on at Hain here prices are at historic lows clearly good progress late you also sell polyethylene prices.

Speaker Change #250: Hi go through in July this is sort of view on both of those.

Speaker Change #251: Yes, and so as you think about that.

Speaker Change #252: <unk> price as you have seen the average price for ethane has trended lower since the second quarter and while we don't know what the third quarter will average out to be looking at the forward curve ethane does look quite will trend somewhere between 3% to five lower.

Speaker Change #252: You look at the forecast from.

Speaker Change #252: Solvents on the forward curve for ethane, which would be constructive for our value.

Speaker Change #253: Thank you.

Speaker Change #253: One moment for our next question.

Michael <unk>: Our next question comes from Michael <unk>.

Speaker Change #254: Wells Fargo.

Michael <unk>: Hey, guys.

Speaker Change #255: Nice quarter, and I'll come to that market.

I guess my first question when you think about Pam.

Speaker Change #255: Sequentially into the third and the fourth I think the outlook for <unk> margins are are kind of.

Speaker Change #256: Sluggish I guess from the consultants do you think.

Speaker Change #257: How do you think the progression there.

Speaker Change #258: It unfold if demand stays around these levels for the SEC.

Speaker Change #258: Half.

Speaker Change #258: Demand for.

Speaker Change #259: Pam partners are pretty stable and I mentioned actually demand for polyethylene PVC being quite good, especially in the export market and we have been able to raise prices on caustic and chlorine demand is stable.

Speaker Change #259: And the prices more or less stable, there's a few dollars up or down depending on which quarter. It goes.

Speaker Change #259: But I think the demand is in the U S, especially.

Speaker Change #259: Stable and said the Destocking is pretty much over.

Speaker Change #259: Reflecting the true economic economy demand for various products.

Speaker Change #260: Got it and then just just a follow up on pipe and fittings sounds like that business continues to show really good strength.

Speaker Change #260: Do you think.

Speaker Change #262: <unk> growth will be as good in the second half and then I was just curious on profitability you have a competitor out there that sales margins.

Speaker Change #263: Now well above yours.

Speaker Change #262: <unk>.

Speaker Change #264: And any reason why your profitability would it be sort of similar to theirs.

Speaker Change #265: Kind of that 50%, 60% range and operating margin.

Speaker Change #266: Well, Mike I think when you look at the strength, we're seeing really in the materials that we see in our pipe and fittings business again.

Speaker Change #266: Continuing to see really good value really in both the pipe and the <unk> application and we're one of the few players that really are in that integrated pipe and fittings solution business.

Speaker Change #266: Certainly our place really in the large municipal water solutions, both fresh and storm water is a big driver for the value proposition we bring forth.

Speaker Change #266: And it really is a focus of driving value for those customers and looking for value for our <unk>.

Integrated stakeholders in this process. So it really is looking to make sure that the solutions that we have both in our pipe and our <unk> solutions provide real value, we get focused really on the value rather than the volume in this business.

Speaker Change #267: Thank you.

Speaker Change #268: Youre welcome.

Speaker Change #269: Thank you our next question.

Frank niche: Our next question comes from Frank niche.

Frank niche: Refresh LLC.

Frank niche: Thank you and good morning, and let me also add my congrats to John Mark If I could just follow up on that on that last question and answer Albert.

Pam: In terms of the stability of demand and Pam.

Speaker Change #270: The price increases in the lower raw materials it sounds as if we're looking at reading.

Speaker Change #271: Reading between the lines it sounds as if we're looking at a flat to up third quarter in Pam.

Speaker Change #271: Haps.

Speaker Change #272: Somewhat moderated by the Petro one turnaround so just curious if I'm thinking about that in the proper context and or perhaps.

Speaker Change #273: What sort of level of impact do you believe the Petro one turnaround which starts in September will have on <unk> and <unk>.

Speaker Change #273: Yes.

Speaker Change #274: Suddenly the Petro one turnaround will have some impact but it is a reminder, that westlake as a net buyer of ethylene.

And even though ethane price has reduced which is great. It helps our.

Speaker Change #274: $4 7 billion pounds of ethylene capacity that we're net buyers who are paying high ethylene prices and also we mentioned that we are booking.

Speaker Change #274: Mothballing of our planting in the Netherlands, which also even though it's not a cash outflow in the third quarter, we're booking in the third quarter.

Speaker Change #274: So those accounting.

Costs will impact our third quarter results.

Speaker Change #275: It's admirable that you are highlighting the mothballing costs.

Speaker Change #276: Since since 99, 9% of companies would put that in and other or restructuring or what have you in <unk>.

Speaker Change #276: And strip it out from EBITDA, which I suspect that the street will do on its own and Albert if I could just ask you.

John Mark: Now John Mark is in place and it obviously will take them a little bit of time to get up the learning curve, how do you view your future involvement.

Albert Chao: Within within Westlake over the next year or two.

Albert Chao: What sort of level of environment, if you might be asking that question.

Speaker Change #277: Suddenly et cetera.

Speaker Change #278: We are going through a transition as John Mark mentioned, he's been here only a few weeks and even though he is a seasoned veteran.

Speaker Change #278: And in our business globally.

Speaker Change #278: Westlake.

Speaker Change #278: <unk>.

Speaker Change #279: He has to understand and also visiting plans visiting customers and so on so forth.

Speaker Change #280: We have over 100 facilities around the world that he'll be spending some time visiting some other people.

Speaker Change #279: But.

Speaker Change #279: Moving up to the chairman position I will do what my brother has done James.

Speaker Change #281: And tried to follow his first step even though he is still a senior chairman so looking over my shoulder to make sure I'm doing a good job.

Speaker Change #281: But it's a team effort Westlake is really.

Speaker Change #281: Our team worked together closely.

Speaker Change #281: And we've done well and Jo Mark we'll continue that culture that Westlake established over the last 40, almost 40 years.

Speaker Change #281:

Speaker Change #282: And it's our goal so I will learn the loss of Xiao Mark Baum experience globally.

Speaker Change #281: <unk>.

Speaker Change #282: I also learned a lot from you guys.

Speaker Change #284: <unk> to meet you and look forward to going with shell Marc to lead us.

Speaker Change #282: Key.

Speaker Change #285: Investors analysts to communicate and to learn from you and to March forward and communicate what Mark's view of Westlake strategy going forward, which is in line with our his history, but we bring a lot of new ideas.

Speaker Change #285: Insights into our business.

Speaker Change #286: Terrific. Thanks, Thanks, so much.

Speaker Change #288: Youre welcome.

Alexi: Our next question comes from Alexi <unk> framework.

Speaker Change #286: Bank.

Alexi: Thank you John Mark wish you best of luck as the CEO and Albert can you tell us how your approach to search for Westlake as new CEO.

Speaker Change #289: Focused on our candidate was building products experience commodity chemicals experience and John marks bio suggests significant experience in international specialty chemicals, So should we read anything into this.

Speaker Change #290: Well, we the board.

Speaker Change #291: And along with James and I and some of our key people has done a very thorough search for the right candidate to be the new CEO is not an easy task as you mentioned, we have a very different portfolio from typical chemical company.

And also with our global position.

Speaker Change #292: So we're very glad to find show Mark who has as I mentioned, a tremendous global experience and has a chemical background and.

Speaker Change #292: So I think the Penn study hip business will be a little bit newer to gel Marc but so he has been evolving.

Speaker Change #292: In building homes settled out so he understands the importance of housing to people around the world and I think this will be a tremendous.

Speaker Change #292: Driver for.

Speaker Change #292: Demand for chemical products as our homebuilding products as you know.

Speaker Change #292: Our hip business are primarily North American base.

So we have good technology that we mentioned.

Speaker Change #292: And we will find opportunities we can apply our technology to other parts of the world.

Speaker Change #292: Thank you Albert and then turning to current business.

Speaker Change #293: The margin upside this year in here.

Are you surprised yourselves or perhaps you can kind of recognize you were too conservative and if you are surprised what do you think was better this year than expected.

Speaker Change #293: Okay.

Speaker Change #294: Well the demand we mentioned the volume the volume was strong.

Speaker Change #295: Good and 2023 is stronger than first quarter of 2024.

Speaker Change #295: Even though as Steve mentioned, the housing starts projects with bi and Hh B I think it's $1 4 billion units last year projecting $1 3 million units. This year as a reduction and we're hearing about the various comp.

Speaker Change #295: Companies reported on the housing and construction business, but I think going forward, where the fed's reduction.

Speaker Change #296: Interest rates and tenure.

Speaker Change #297: Interest rate has dropped to a three 8% from $4 $4 five or something just a few months ago.

Speaker Change #297: It should be really be very helpful for the housing industry going forward, maybe not right away, but thats. The trend that will help not just housing industry helped the U S economy as a whole and that will also help the global economy as a whole with lower interest rate.

Speaker Change #297: As Steve mentioned, we are positioning ourselves to be ready for it.

Speaker Change #298: But the.

Steve: Third quarter, usually also was a good quarter from a volume point of view, but fourth quarter will be seasonally slow that's normal and.

Steve: So depending on how fast the fed drops rates and the economy in general.

Speaker Change #299: We cannot predict but volume growth so changes will be on a short term, but we believe on a longer term basis that next few several years with low interest rates should be definitely positive for the U S economy and for our industry.

Albert Chao: Great. Thank you Albert.

Speaker Change #300: Youre welcome.

Speaker Change #301: Our next question comes from Josh Spector UBS.

Speaker Change #301: Westlake.

Speaker Change #302: Just curious of your view if you can maybe comment at all on one.

Speaker Change #303: As your pipes and fittings margins.

Speaker Change #304: <unk> higher than the hip segment average today versus where it was and then to the sustainability of that pricing and spreads in three has something changed structurally supply wise that would justify a much higher spreads in the downstream part of the business.

Speaker Change #305: Yes, so Josh good question and I think what you've seen US do is really focus really on an integrated solution and what I mean by that is the solution that provides not only pipe, but also things that go with that recent acquisition. We undertook two years ago was the.

Speaker Change #305: So it was a fittings business. This is Alaska acquisition on referring to where we have not only larger diameter fit in our portfolio, but this transaction allowed us to fill out that portfolio offering. So what attributes I think the improved value proposition that I think we provide is being able to provide an integrated.

Speaker Change #305: Solution to our customers that is not only providing the the pipes that are necessary, but also the ELD.

Speaker Change #305: Elbows arms fittings that go with those wide variety of sizes and pipes. So that integrated solution of pipes and fittings is important are the only player that really provides an integrated solution in north America of pipes, and fittings, and I think whether youre selling it as individual components at a job site or selling it.

As an integrated pipe and fittings solution of job site, that's really where the value proposition I think has come through on top of that you've also seen capital will begin to flow from the infrastructure, Bill, which is adding volume to the business and this business with that added volume certainly provides scale.

Speaker Change #305: So that allows us to really really drive real value for that pipes and fittings business, which is why we call. It out the last couple of quarters as really value drivers for the results of each quarter.

Speaker Change #306: Okay. Thanks for that but I guess, maybe to follow up is that when I look at peers that are smaller and don't have those advantages reporting margins of 50% to 60%.

Speaker Change #307: Not sure. If you can comment on why that would be the case and I guess for my view I'm thinking about it in the context.

Speaker Change #307: At Westlake is over earning to some context, there or if you'd say hey, your margins are much less than that what I. Just said that it gives us some degree of comfort that maybe it's at a more manageable level going forward. Thanks.

Speaker Change #308: Yes, I can't speak to others margins in the business, that's something that you'd have to have a dialogue with them about what I can say is I believe that the value proposition were providing through the integrated solution of resin PVC resin going into our pipes and solutions. Our long term sustainable. These are really good margins, we're providing and I don't.

Speaker Change #308: Believe were over earning in a periods such as this as Albert noted when you take a look at the housing starts were still well below the numbers that we need for the construction activities here in North America, and even if you look at the starts that we've seen even this past quarter about one 3 million starts per the U S census numbers in <unk>.

Speaker Change #309: These shows is trending lower in the by the end of the year, but Nevertheless, I would say, we're not really over earning because I think we're really providing real value both through the building products. The hip side of our business as well as the integrated value, we gave by providing that resin across through our hip segment.

Steve: Okay. Thanks, Steve.

Steve: Hmm.

Speaker Change #310: Our next question comes from Hassan Ahmed of Alembic Global Advisors.

Hassan Ahmed: Good morning, Albert and Steve and congratulations John Mark on the on the new role.

Speaker Change #310: Yes.

Hassan Ahmed: First question around just look I mean.

Speaker Change #311: You guys did on an annualized basis, almost 3 billion in EBITDA.

Speaker Change #311: In Q2.

Speaker Change #313: And I, obviously appreciate the comments that Steve just made about how you guys aren't over earning in certain segments.

Speaker Change #314: If I were to venture a guess I mean, just looking at the business environment, you guys are well below normal with significant upside to hitting normal business conditions. So now with that said how should we think about this annualized $3 billion number that you just reported.

Speaker Change #315: Relative to where normal earnings should be I mean is there significant upside to that number.

Speaker Change #316: In a normalized business environment.

Hassan Ahmed: Well Hassan.

Hassan Ahmed: Thank you for the question, but I would say, we certainly still see headwinds and we called out some of the.

Hassan Ahmed: So while we do expect that.

Hassan Ahmed: We're seeing a better supply demand balance given the pricing initiatives, we've seen a number of our Pam products, we're still not to a point, where we're back to those levels of pricing back in 2003 and 2002, but there are certainly there certainly is operating leverage in the perm side of the business.

Speaker Change #317: Understood understood very helpful and as a follow up.

Speaker Change #317: I understand it's the first couple of weeks for John Marc and his new role.

Speaker Change #318: So maybe this is a question both for him and for Steve as well.

Albert Chao: And obviously Albert.

Speaker Change #319: I'm just trying to get a sense of obviously the portfolio has changed a fair bit over the last couple of years.

Speaker Change #320: As you guys are very well aware sitting here as analysts one of the things that we're looking for is a valued.

Speaker Change #321: Evaluation multiple re rating Reg so how sort of as you went through the whole interview process Albert.

Speaker Change #321: What was the thought process with regards to that and maybe John Mark can give us.

John Mark: Sort of high level views with regards to.

Speaker Change #322: What are you thinking in terms of potentially getting that valuation re rating and making the market sort of see this portfolio change that that has transpired.

John Mark: Yeah, well as you know Hassan that we look at investments that bring risk.

John Mark: The risk adjusted return above our cost capital.

Speaker Change #323: And also optimistic on this one.

Speaker Change #324: When we want to buy companies or whatever it takes to to agree on a deal.

Speaker Change #323: No.

Speaker Change #325: But we have been building.

Speaker Change #325: Hip business segment, and as Steve mentioned that all synergies.

Steve: Both from the hip to Perm side as well as within hip so while our cross selling opportunities come along.

Steve: And we will continue to pursue those opportunities as they arise.

Speaker Change #326: So our job really is to bring value to.

Speaker Change #327: To our investors, how the street see us as multiple.

Speaker Change #328: Uptake or whatever that's all.

Out of our control.

Speaker Change #328: All we do is bringing sustained return to our shareholders.

Speaker Change #328: A long term basis, that's the key and not for short term gangs.

Speaker Change #328: And we hope that the market.

Speaker Change #328: See the value that we bring but it's out of our control.

Speaker Change #328: Very helpful. Albert Thank you so much.

Speaker Change #329: Youre welcome.

Michael <unk>: Our next question comes from Michael <unk> at.

Michael <unk>: At Barclays.

Michael <unk>: Great. Thanks, Good morning, guys.

Yes, I think the industry. Some other industry players were impacted by borrow hurricane.

Speaker Change #330: Not long ago and are recovering from those excellence, but I think as you said.

Speaker Change #331: Operating rates as being.

Speaker Change #332: Very good after.

Speaker Change #333: Hurricane and demand for both the PVC and caustic are pretty strong. So the rates has been doing very well.

Speaker Change #332: But it will be.

Speaker Change #333: Turnarounds coming up in the third quarter.

Speaker Change #333: All of our various plants.

Speaker Change #333: So.

Speaker Change #334: And we don't know.

Speaker Change #334: Still early in the game of August versus Hurricane season, which ends the end of November.

Speaker Change #334: But we are very careful.

About our inventory and production and so on and so forth.

Speaker Change #335: Great and then your hip segment volumes were up 16% in the quarter can you help us better understand what categories are growing faster than that and what categories are growing slower than that and just the clarification is product mix effect reported through price or volume for Westlake.

Speaker Change #336: Yes, so Mike when you think of.

Speaker Change #337: The value contributors here, we certainly see the as I've called out kind of the pipe and fittings in the siding and trim businesses really contributing very well to the hip segment results.

Speaker Change #337: Our windows business is our smallest subsegment within the hip business and so I would say that is the smallest contributor still.

Speaker Change #337: Regional in terms of play it plays in the Texas market and kind of the southeast market. So.

Speaker Change #337: So therefore, probably the weakest contributor in that business, but I would say, we're continuing to see good cross selling which is why you saw the volumes pick up and given the strength I think in the branding that you see in that business I think the cross selling is attributable to the efforts by our hip team to understand and pushed through the <unk>.

Speaker Change #337: Brand value that we see in all the product categories that we have so I would say that cross selling with a nice contributing factor to the volume pickup that we saw in the quarter.

Speaker Change #338: Thank you.

Speaker Change #337: Yeah.

Speaker Change #339: Our next question comes from this one.

Speaker Change #340: <unk> capital markets.

Speaker Change #341: Alright, Thanks for taking my question and Hope you guys are well and welcome Mark as well.

Speaker Change #341: So I guess.

A couple of questions. So first off it.

Speaker Change #341: In hip.

Speaker Change #343: Obviously, some really strong performance on our pipe and fittings.

Speaker Change #343: Maybe you can.

Speaker Change #345: Discuss maybe the margin profile there and then also for global compounds and Royal building products.

Speaker Change #346: How are those businesses performing and do they have a margin profile, maybe it was less than pipe and fittings in this quarter or higher how would you describe those two businesses. Thanks.

Speaker Change #346: Yes, so I would say Arun in our compounds business.

Speaker Change #347: That is a business that has a pretty stable and steady margin business, but it would be in the middle range of middle to lower range of the range of margins that we see in the hip side of our business I would say that the two sub segments that I mentioned, and which are the pipe and fittings business and our siding and trim businesses are where they are stronger.

Speaker Change #347: Performers during the during the quarter and I call those two out in the first quarter as well of consistently stronger performing in that space.

Pam: And then in Pam.

Pam: Steve and then Pam.

Pam: Just curious about you mentioned some slow improvement I guess in polyethylene prices for PVC resin.

Pam: So that's that's helpful. Do you expect those prices to continue to slowly move higher and what would you say on.

Speaker Change #348: <unk> and then just curious on the epoxy side.

Speaker Change #349: You guys took some action do you see some other auction and rationalizing assets.

Speaker Change #349: Coming forth.

Speaker Change #351: When would that potentially impact market conditions and epoxy.

Speaker Change #352: So <unk>, yes, we certainly have seen strength in a variety of these chemical chains I think you've heard US note that we saw strength really in both PVC as well as in polyethylene in the third quarter as well as in the second quarter. So as we as that.

Speaker Change #352: Rick noted in his comments, we've continued to see a better balanced market in polyethylene and we saw some price settlements that were.

Speaker Change #352: Positive and constructive to earnings both in the second and in the third quarter. So far we've also seen the same play out in PVC as well the second quarter and third quarter tend to be strong markets for PVC.

Speaker Change #352: Even though we've seen some headwinds on housing starts certainly the second and third quarter tend to be stronger and therefore strength and demand which pulls on price.

Speaker Change #352: Certainly the actions that we're taking a wide variety of those mothballing, the ECH unit as well as the <unk>.

Speaker Change #352: Actions with the European authorities and the U S authorities on this antidumping should all contribute to stronger results in the future for our proxy business. So we look very forward to seeing those actions take hold and deliver a better value.

Speaker Change #353: And just any thoughts on caustic and chlorine.

Speaker Change #353: Ah.

Speaker Change #354: As I mentioned this is as I mentioned before caustic and cooling demand are pretty stable.

Speaker Change #354: Exporting a fair amount of PBC as well as cost take out we still had a lowest cost energy.

Speaker Change #354: <unk>.

Speaker Change #354: Our competitive advantage over the rest of the world.

Speaker Change #354: So are the prices being stable as well.

Speaker Change #354: So.

Speaker Change #354: I'll call it heading into the fourth quarter things will slow down a bit around the world.

Speaker Change #354: But in.

Speaker Change #354: On January 1st quarters are also somewhat weak and then depending on the economy in the world The second and third quarter will improve next year.

Speaker Change #354: Thanks.

Speaker Change #354: Our next question comes from Vincent Andrews from Morgan Stanley.

Speaker Change #354: Hi, Thank you for taking my question. This is Turner Hendrix on for Vincent can.

Turner Hendrix: Can you help us understand what's going on from a cash flow perspective, and what you expect from working capital for the year.

Turner Hendrix: Yes.

Speaker Change #355: As you saw in the second quarter, we did settle out the litigation charge that we took earlier this year I would expect that with the demands we're seeing really in the activity construction activity in our hip business will continue to have some pull on.

Speaker Change #355: Working capital over the course of the third quarter.

Speaker Change #355: As we go forward.

Speaker Change #356: Certainly prices have trended up in our products and certainly to maintain adequate inventories for our customers that will pull on inventories, but the offset to that is we have seen some lower prices trending you heard my comments earlier about ethane ethane prices are trending lower and so that will be the offset to some of that pick.

Speaker Change #356: And working capital.

Speaker Change #357: Great Great I appreciate the color there. So hopefully this isn't redundant to the prior question, but in the Chlor alkali part of the business I'm. Just wondering if you could speak further to relative strength or weakness of chlorine versus caustic soda and whether you see pricing upside for either of these products for the balance of the year.

Speaker Change #356: Okay.

Speaker Change #358: Yes, I think.

Speaker Change #359: CMA is looking at prices to increasing caustic in the U S by $20 or short term, but coming down in October November.

Speaker Change #359: This year, so it's kind of a wash.

Speaker Change #359: And.

Chlorine prices also bumping up and down a little bit.

Speaker Change #359: So I think things are pretty stable and.

Speaker Change #360: Lower corn in the U S goes into PVC as I mentioned <unk> also have the PVC prices increased export price again, bobbing up and down as trend upwards as Paul with Versal.

Speaker Change #359: Second quarter of this year.

Speaker Change #361: And U S is lowest cost form of ethylene and chlorine point of view to export PVC.

Speaker Change #362: Great. Thank you for the color.

Speaker Change #363: Youre welcome.

Speaker Change #364: Our next question comes from Kevin Mccarthy vertical research partners.

Kevin Mccarthy: Yes, Thank you and good morning, Albert it's been a pleasure.

Kevin Mccarthy: <unk> and good morning to Mark look forward to meeting you.

Kevin Mccarthy: I just wanted to clarify on the polyethylene resin price trend. It does sound like you're positive momentum there and my recollection is that producers who are seeking.

Speaker Change #365: An increase of five a pound for the July contract can you comment on on how much of that.

Speaker Change #366: We were able to realize for LOE and linear low density polyethylene.

Speaker Change #367: Yes, the July price has settled with <unk>.

Speaker Change #367: S.

Speaker Change #368: The industry announced and there's potential increases for at least some of the industry players announced price increases for August October, but time will tell.

Speaker Change #368: Whether those increases can be.

Speaker Change #368: Effective or not but I think the.

Speaker Change #368: The main reason for that is export prices gone up.

And it helped to drive up domestic prices, well and demand is pretty pretty stable and as I mentioned.

Speaker Change #368: Typically our second and third quarter are strong demand.

Speaker Change #368: Okay.

Speaker Change #368: The quarter's hoped for.

Speaker Change #368: Prices as well as polyethylene and PVC.

Speaker Change #368: So the July settled up <unk>.

Speaker Change #368: Perfect and then.

Speaker Change #369: Let me switch gears over to hip certainly very impressive first half of the year with regards to volumes and margins, but I did want to ask.

Speaker Change #370: Point number three on your slide five where.

Speaker Change #371: You call out kind of a trio of challenges in terms of weather slowdown in starts and also remodeling.

Speaker Change #372: Can you elaborate on that in the context of seasonality for example.

Speaker Change #373: Thinking about those.

Speaker Change #374: Headwinds do you think that it will result.

Speaker Change #374: In the seasonal pattern for 2024, where the first half.

Speaker Change #375: Is stronger than the second half or be able to overcome that through some of the things that you talked about earlier in the call. How would you think about the way that this year's seasonal cadence is shaping up in here.

Speaker Change #374: Yes.

Speaker Change #374: Yeah. So Kevin good question and as you think about the weather patterns. It does have an impact really and really when construction activity. When housing starts actually start and so the reason for the call out really is just an indication that certainly while we see certainly positive trends certainly there are clear headwinds.

Speaker Change #376: And some of the headwinds you note there and that is really weather patterns and certainly interest rates remain pretty elevated and so certainly that is creating some of the the concern. We all have as we look into the back half of the year weather patterns continue to be an issue that we have to kind of work through and you know it.

Speaker Change #376: Much of the country, it's been very very warm and certainly in portions of the south and South West.

Speaker Change #376: Very very wet weather, which makes it challenging for those housing starts to actually start and pull on the volume demand we see in our building products. So while we continue to see good volumes that we've seen so far in the first half of the year certainly it is just a if you will a watch out for the back half of the year. If we see weather patterns continue to persist it could be could be.

Speaker Change #376: Challenges, but again with you look at the <unk> numbers for the year. These they forecast housing starts in the fourth quarter and the third quarter and they are somewhat lower than the first half of the year. So they do trend down from the peak that we saw in the first quarter they trend lower in the second quarter and in HB is trending.

Speaker Change #376: Third and fourth quarter somewhat lower we looked at a variety of forecasters I'm, just calling out in HB, just as an indication of Directionally, where they see their starts going for the rest of this year.

Speaker Change #376: Thank you so much.

Speaker Change #376: Our next question comes from David Begleiter at Deutsche Bank.

Speaker Change #376: Thank you.

Albert Chao: Albert the caustic price increase you mentioned that the CMA has.

Speaker Change #377: And there are estimates.

Speaker Change #378: Is below the proposed increase from you and your competitors.

Speaker Change #379: Do you think CME CMA as being too conservative or do they do you think the market is maybe a little bit weaker than you thought relative to your announced price increases.

Speaker Change #379: Yes.

Speaker Change #380: We our industry announced price increases.

Speaker Change #381: Supply demand and negotiate with customers.

Speaker Change #381: Some are on a quarterly basis, we don't see the price chain.

Speaker Change #381: Change right away as some are negotiated some on monthly basis. So all of the prices kind of all over the place.

Speaker Change #381:

Speaker Change #381: And I guess, the CMA is just maybe the average or something.

Speaker Change #382: They announced.

Speaker Change #383: It is indication that it's going up going down that's the indication.

Speaker Change #384: Much actually goes through.

Speaker Change #384: Hotel when we finish depending on as mentioned earlier, where they are quarterly monthly or negotiated basis.

Albert Chao: Very good and Albert just on the July polyethylene price increase of five.

Albert Chao: Do you think that's more of a function of hurricane barrel impacts or more of a function of balance.

Supply demand fundamentals.

Albert Chao: Yes. Good question I think it's a combo.

Speaker Change #385: Combination suddenly there's some impact from production from barrel, but I think as I mentioned earlier the export prices moved up that is the biggest I think impact our domestic price and actually some of the export price I'll put it close domestic price that on a netback basis. So when export price goes up then.

Speaker Change #385: People can export rod and sell domestically, which.

Speaker Change #385: Allowed us domestic price move up as well.

Speaker Change #385: And I mentioned, the hurricane season, coming up and people may want to have some inventory.

Speaker Change #385: So all these factors the impact on the price increase that we just settled in July.

Speaker Change #386: Thank you.

Speaker Change #387: Youre welcome.

Speaker Change #387: Okay.

Speaker Change #387: Our next question comes from Stephen Byrd.

Stephen Byrd: Think of America Securities.

Stephen Byrd: Yes. Thank you.

Stephen Byrd: What portion of the 15% sequential volume gain and hip would you attribute to just the.

Speaker Change #389: The seasonality of underlying volume growth.

Speaker Change #390: Versus the portion of that 15% that you think you gained.

Speaker Change #390: Either your effort to brand or your cross selling initiatives.

And for the portion that's cross selling.

Speaker Change #392: What is it that you're offering the distributor or what's the value proposition to be able to get more shelf space.

Speaker Change #393: Yeah, Steve Good question and I'd say, the greater portion of it really is is the ability to really have.

Speaker Change #393: Brand recognition and cross selling and while there is certainly is some seasonal uplift from <unk> into <unk>.

Speaker Change #393: That is certainly part of the equation here I'd say.

Speaker Change #393: A meaningful portion of it really is brand recognition and value recognition and therefore cross selling in that cross selling recognizes the portfolio that the boral acquisition brought to the table with our distributors as you know that distributor network has seen increased consolidation.

Speaker Change #393: And they really want to have an ability to work with a limited number of producers who can provide the broadest portfolio and offer that good better best good better or best range of product offerings, which we do provide.

Speaker Change #393: And that increased selling effort that we have now with a broader portfolio offering through these acquisitions and our hip segment provide us the ability to provide the brand name recognition and products that they need and that good better or best portfolio and then allows us to have the ability to service the customer our distributors.

Speaker Change #393: Wide.

Speaker Change #393: And so that takes a little while to really translate since the acquisition of borrow a couple of years ago, but thats, what youre seeing coming through today.

Speaker Change #394: And just a question about competitive pricing clearly you would have competitors that donor house.

Speaker Change #395: The brand royalty that you have in.

Speaker Change #396: Volumes could be challenging for many are you seeing competitive pricing and hip Samir.

Speaker Change #395: Some of your smaller competitors.

Speaker Change #397: And or do you see yourself having.

Speaker Change #398: Some defensiveness against that because of your brand loyalty.

Speaker Change #399: Of course, we have to be competitive in our pricing across all markets and I would say in the building products market. These are a smaller these are markets, where you can't transport product nationwide. So if youre talking about concrete roof tiles. It is a market that is a subset of our nationwide market these might be markets in.

Speaker Change #399: Maybe a 500 mile radius, where you can't transport that product. So of course, you have to be competitive in those markets and each market has strengths and weaknesses, depending on the construction activity, whether we're talking the California market, the Texas market or the Florida market. Each one of those markets are unique and we have to be competitive in each one of those markets in <unk>.

Speaker Change #399: Deal with <unk>.

Speaker Change #399: Smaller or larger competitors as we face them.

Speaker Change #399: Thank you.

Speaker Change #400: Youre welcome.

Speaker Change #400: Our last question comes from Jeff Zekauskas.

Jeff Zekauskas: At Jpmorgan.

Jeff Zekauskas: Hi, Thanks very much.

Speaker Change #402: What was the PVC contract settlement for July.

Jeff Zekauskas: PVC.

Speaker Change #402: I think settled at.

Speaker Change #403: Half a penny a pound.

Speaker Change #404: All right.

Speaker Change #405: And then would you lie on yes, thank you very much.

Albert Chao: And then Albert yes.

Speaker Change #407: Do you have a view of the Chinese PVC market from here over a longer period of time do you think the Chinese market has gone through a period of overbuilding, and then weakness and continued weakness.

Albert Chao: Or do you think that there is room for that market to accelerate over the next two or three years.

Speaker Change #408: Yes, that's a good question.

Speaker Change #408: I think the Chinese PVC.

Speaker Change #408: Business or industry.

Speaker Change #408: Going through a transition.

Speaker Change #408: In the past several years.

Speaker Change #408: PVC was about 80% of the capacity in China.

Speaker Change #408: And now carbide PVC has dropped to about 70 odd percent so they're more ethylene based PVC plants being built.

Speaker Change #408: That trend will continue to phase out the high energy and polluting carbide based PVC as well as they have the mercury catalyst issue, we know that.

Speaker Change #408: New gold based catalyst, which is both more expensive.

Speaker Change #408: But it can also replace.

Speaker Change #408: The Mercury based carefully but still it's a carbide based process.

Speaker Change #408: So I think.

Over time, the Chinese industry, PVC industry with Wolfe toward ethylene based which will lose its competitive advantage.

Speaker Change #408: Hawaii cover basic the Gulf China at all coal.

Speaker Change #408: And it can make PVC cheaply from carbide.

Speaker Change #408: Switch to ethylene and most of the ethylene in China.

Speaker Change #408: Naphtha base oil base, which is less competitive with U S base.

Speaker Change #408: Ethane based natural gas based ethylene.

Speaker Change #408: So we'll see how fast the Chinese PV industry morph into more ethylene based.

Speaker Change #408: Kind of pricing will be but even though China, we all know that they have.

Speaker Change #408: Economic structural.

Speaker Change #408: Problem, especially in housing housing is still a huge.

Speaker Change #408: Market business for the Chinese economy, and the demand is still huge for low income housing.

<unk> is trying to do.

Speaker Change #408: Do more of the low income housing, but still.

Speaker Change #408: Housing the heat power water electricity.

Speaker Change #408: And PVC it'll be a very important and also window frames in China's <unk> PVC window frames, so PVC will be very important.

Speaker Change #408: Component of the housing demand in China.

Speaker Change #408: Forward.

Speaker Change #411: Okay. Thank you so much.

Speaker Change #412: Youre welcome.

Speaker Change #413: Thank you.

Speaker Change #413: This concludes our question and answer session I would now like to turn it back to Jeff Miller for closing remarks.

Jeff Miller: Thank you again for participating in today's call. We hope you will join US again for our next conference call to discuss our third quarter results.

Jeff Miller: Thank you for participating in today's Wednesday conference call. As a reminder, this call will be available for replay beginning two hours. After the call has ended.

Jeff Miller: A replay can be accessed to the Olympics.

Jeff Miller: Is that.

Q2 2024 Westlake Corp Earnings Call

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