Q4 2024 Westlake Corp Earnings Call
John McNulty, Johnathan Zoeller, Albert Chao, Jeffrey Zekauskas, Jeffrey Zekauskas, Jeffrey
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation Fourth Quarter and Four Year 2024 Earnings Conference Call.
During the presentation, all participants will be in a listen-only mode.
After the speaker's remarks, you will be invited to participate in a question and answer session.
As a reminder, ladies and gentlemen, this conference is being recorded today, February 24, 2025.
Speaker Change: I would now like to turn the call over to today's host, John Zoeller, Westlake's Vice President and Treasurer. Sir, you have a conference call to discuss our fourth quarter and fully results for 2024.
Speaker Change: I am joined today by Albert Chao, our Executive Chairman, John Mark Gilson, our President and CEO, Steve Bender, our Executive Vice President and Chief Financial Officer, and other members of our management team.
Speaker Change: During the call, we will refer to our two reporting segments, Housing and Infrastructure Products, which we refer to as HIP, or Products, and Performance and Essential Materials, which we refer to as PEM, or Materials.
Speaker Change: Today's conference call will begin with Jean-Marc who will open with a few comments regarding Westlake's performance. Steve will then discuss our financial and operating results, after which Jean-Marc will add a few concluding comments and we will open up the call to questions.
Speaker Change: During the third quarter of 2024, we accrued $75 million of expenses related to the decision to mothball two units within our European epoxy business.
Speaker Change: Additionally, during the fourth quarter of 2023, we recorded a noncash impairment charge of $475 million related to the company's epoxy business as well as $850 million charge to fully resolve certain liability claims.
Speaker Change: We refer to these three charges as the identified items in our earnings release and on this conference call.
Speaker Change: References to income from operations EBITDA net income and earnings per share on this call exclude the financial impact of the identified items.
Speaker Change: Such comments made on this call will be in regard to our underlying business results using non-GAAP financial measures.
Speaker Change: Reconciliation of these non-GAAP financial measures to GAAP financial measures is provided in our earnings release, which is available in the Investor Relations section of our website.
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. These forward looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. These risks at all.
Speaker Change: Certainties are discussed and Westlake SEC filings, we encourage you to learn more about these factors that could lead our actual results to differ by reviewing the SEC filings, which are also available on our Investor Relations website.
Speaker Change: This morning <unk>.
Speaker Change: <unk> issued a press release with details of our fourth quarter and full year results.
Speaker Change: This document is available in the press release section of our website at Westlake Dot com.
Speaker Change: We have also included an earnings presentation, which can be found in the Investor Relations section on our website.
Speaker Change: A replay of today's call will be available beginning today two hours following the conclusion of this call.
Speaker Change: This replay may be accessed via web plus likes website. Please note that information reporting on this call speaks only as of today February 24th 2025, and therefore, you're 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: Now I'd like to turn the call over to John Marc Gilson.
Speaker Change: Thank you John and good morning, everyone.
Speaker Change: We appreciate you joining us to discuss our fourth call.
Speaker Change: And full year 'twenty 'twenty four results.
Speaker Change: During the fourth quarter.
Speaker Change: Each of our segments delivered year over year sales volume and EBITDA growth.
Speaker Change: While advancing several key initiatives to improve Westlake future earnings potential.
Speaker Change: Including <unk>.
Speaker Change: Continuing construction on our new P. B C O pipe.
Speaker Change: Two studies by strong customer demand in our hip segment.
Speaker Change: We have taken decisive action in.
Speaker Change: In reducing structural cost in our business.
Speaker Change: Such as the most boring.
Speaker Change: T H.
Speaker Change: E T H units in tennis.
Speaker Change: Other company wide cost saving initiatives.
Speaker Change: [noise] approximating $50 million in the fourth quarter.
Speaker Change: This brings total cost savings for the year at $270 million.
Speaker Change: Exceeding our target.
Speaker Change: Overall.
Speaker Change: I am pleased with the progress the team is making to position Westlake for continued earnings growth well into the future.
Speaker Change: For the fourth quarter of 2024.
Speaker Change: We reported sales of $2 $8 billion and EBITDA of $416 million.
Speaker Change: An increase of 7% compared to the fourth quarter of 2023 EBITDA of $390 million.
Speaker Change: Sales volume increased year over year at each of our segments.
Speaker Change: Highlighted by <unk>.
Strong 7% growth in hip.
Speaker Change: Driven by continued solid demand for pipe and fittings.
Speaker Change: And site in trend.
Speaker Change: Meanwhile.
Speaker Change: Sales volume growth of 1%.
Speaker Change: Was driven by export market demand.
Speaker Change: And higher polyethylene production levels.
Speaker Change: We some polyethylene lines setting new production records during the call there.
Speaker Change: While time grew sales volume year over year.
Speaker Change: Average sales price was impacted by capacity increases across the industry.
Speaker Change: We also delivered on our proactive cost control measures across all of our business.
Speaker Change: EBITDA margin improving in each segment in the fourth quarter of 2024 compared to the same period in 2023.
Speaker Change: Regionally.
Speaker Change: North America was a bright spot for us during the fourth quarter.
Speaker Change: As demand remained relatively strong in both segments.
Speaker Change: Our performance in North America was aided by a broader product portfolio and hip.
Speaker Change: Our strong and differentiated portfolio in Panama.
Speaker Change: And our globally advantaged feedstock and energy position and high degree of vertical integration.
Steve Bender: Before turning the corner over to Steve to review, our financial results in more detail.
Speaker Change: I wanted to take a few minutes to review some of our key accomplishments in 2024.
Steve Bender: First.
Steve Bender: Hip segment achieved record income from operations of $807 million and a record EBITDA margin of 24%.
Steve Bender: Driven by stronger 8% sales volume growth.
Steve Bender: Hip.
Steve Bender: Now set annual records for income from operation in each of the last five years.
Steve Bender: Demonstrating the consistent solid growth characteristics of its underlying housing products and infrastructure product business.
Steve Bender: It's a bit down one point to $1 billion in 2024, and operating income of $807 million.
Steve Bender: <unk> previewed at 85% of our total segment operating income in 2024.
Steve Bender: These are record results provided stability to our overall earnings in 2024 with a massive light cash generative business model with leading market positions in.
Steve Bender: America.
Steve Bender: Yeah.
Steve Bender: Second we began construction on a new PVC or manufacturing plant in Wichita Falls in Texas.
Steve Bender: To support the continued strong customer adoption of this innovative product that improves the municipal pipe installation process.
Steve Bender: Reduced environmental footprint.
Steve Bender: Third.
Steve Bender: We returned approximately $325 million to shareholders through dividends and share repurchases.
Steve Bender: Which demonstrate our commitment to rewarding shareholders.
Steve Bender: And our value based approach to share repurchases, while we grow the company.
Steve Bender: Okay.
Steve Bender: Finally, we finished the year with a solid investment grade rated balance sheet highlighted by $2 $9 billion of cash and cash equivalents.
Steve Bender: Providing flexibility to pursue growth opportunities.
Steve Bender: Taken together.
Steve Bender: I'm very proud of our 2024 accomplishments.
Steve Bender: And I would like to thank our nearly 16000 team members for their hard work and dedication.
That enabled these achievements and our record results.
Steve Bender: I would now like to turn our call over to Steven to provide more detail on our financial results for the fourth quarter and full year of 2020 for Steve.
Speaker Change: Thank you John Marc and good morning, everyone.
Speaker Change: As a reminder for a comparison purposes my comments regarding income from operations EBITDA net income and earnings per share all exclude the financial impact of the $75 million mothball expense accrual that occurred in the third quarter of 2024, as well as a noncash impairment charge of $475 million.
Speaker Change: Related to the company's epoxy business and the $150 million charge to fully resolve certain of liability claims that occurred in the fourth quarter of 2023.
Speaker Change: Westlake reported net income of $7 million or six cents per share in the fourth quarter on sales of $2 $8 billion.
Speaker Change: Net income for the fourth quarter of 2024 included a onetime noncash charge of approximately $45 million or <unk> 35 per share for the revaluation of state deferred tax assets and deferred tax liabilities caused by recent legislative changes in Louisiana.
Speaker Change: We are in dialogue with the state to address solutions to mitigate the impact of this recent legislation.
Fourth quarter EBITDA of $416 million increased $26 million from the fourth quarter of 2023, and we also have higher sales volumes, particularly in hip and our targeted cost savings actions.
Speaker Change: For the fourth quarter of 2024, our utilization of the FIFO method of accounting resulted in an unfavorable pretax impact of $64 million or <unk> 36 cents per share compared to what earnings would've been if we reported on the LIFO method.
Speaker Change: This is only an estimate and has not been audited.
Speaker Change: We delivered $50 million of cost reductions in the fourth quarter, achieving a $170 million of total cost reductions in 2024 exceeding our target of $125 million to $150 million.
Speaker Change: For the full year of 2024, we reported net income of $677 million and EBITDA of $2 3 billion.
Speaker Change: Compared to our 2023 results 2024 sales of $12 $1 billion declined 3%.
Speaker Change: The lower full year of 2024 sales were the result of solid 7% growth in sales volumes, particularly in pipe and fittings and port vinyls that was offset by a 10% decline in average sales price.
Speaker Change: Weight per core vinyls and epoxy resin.
Speaker Change: Turning to our segment results hip sales in the fourth quarter rose year over year, driven by a 7% increase in sales volume.
Speaker Change: Volume growth was strongest in our pipe and fittings business in part due to orders from the third quarter being shipped in the fourth quarter as a result of the wet weather and hurricane impacts that we called out in our last earnings call hip.
Speaker Change: Hips EBITA margin of 19% in the fourth quarter of 2024 improved from the prior year period as cost reduction efforts more than offset the impact of lower average sales price.
Speaker Change: <unk> income from operations of $807 million with a new annual record in 2024.
Speaker Change: Hips earnings growth in 2024 was driven by a strong 8% sales volume growth.
Speaker Change: With particular strength in pipe and fittings.
Speaker Change: The record EBITDA margin in 2024 of 24% was driven by higher sales volumes better product sales mix.
Speaker Change: Our cost reduction actions.
Speaker Change: Hips record earnings demonstrate the earnings capability of our business and also illustrate the benefits of our vertical integration strategy.
Speaker Change: As we begin 2025 hip sales volumes growth continues to look solid ahead of the start of the spring building season.
Speaker Change: Moving to our Perm segment fourth quarter EBITDA of $220 million increased by $19 million from the fourth quarter of 2023.
Speaker Change: The year over year increase in EBITDA was the result of higher sales volumes, particularly for polyethylene driven by increased customer adoption for our recent product innovations such as our pivotal one pellet solution <unk>.
Speaker Change: Sales volumes grew 1% year over year, driven by growth in export demand and increased production as a result of improved plant reliability.
Speaker Change: <unk> fourth quarter, EBITA margin up 12% improved from 11% in the fourth quarter of 2023, driven by our cost reduction efforts.
Speaker Change: EBITDA of $1 2 billion for full year 2024 was lower than 2023 results, primarily due to lower global sales prices and margins as a result of softer demand created by weaker global economic conditions.
Speaker Change: And our two extended maintenance outages that occurred during the third quarter of 2024.
Speaker Change: Turning to the balance sheet and cash flows as of December 31, 2024, cash and cash equivalents for $2 9 billion and total debt was $4 6 billion.
Speaker Change: Our balance sheet continues to be well positioned with a 15 year average debt maturity of life.
Speaker Change: For the fourth quarter of 2024 net cash provided by operating activities was $434 million.
Speaker Change: Capital expenditures were $285 million, resulting in free cash flow of $149 million.
Speaker Change: During 2024, we returned approximately $325 million to shareholders and in the fourth quarter, we returned approximately $125 million to shareholders in the form of dividends and share repurchases.
Speaker Change: We continue to look for opportunity opportunities to strategically deploy our balance sheet in order to continue to create long term value for shareholders.
Speaker Change: Turning our attention in 2025, let me address some of your modeling questions and provide some guidance for the year ahead.
Speaker Change: Housing industry consultants forecast that housing starts for 2025 will be similar to 2024 at $1 3 million.
Speaker Change: The depth and breadth of our portfolio of building products and broad geographical reach across North America provides a platform for continued growth in our hip segment in these market conditions.
Speaker Change: Thus based on our current view of demand and prices, we expect revenue in our housing and infrastructure products segment to be between four four and $4 6 billion with an EBITDA margin of 20% to 22%.
Speaker Change: We expect our total capital expenditures for the company to be approximately $1 billion similar to our depreciation run rate.
Speaker Change: This includes cost for a planned turnaround at our Petro one ethylene unit, which began at the end of January is projected to last approximately 60 days.
Speaker Change: For the full year of 2025, we expect our effective tax rate to be approximately 23%. We also expect cash interest expense to be approximately $160 million.
Speaker Change: Now, let me turn the call back over to Jean Marc to provide our current outlook for our business Schon Marques. Thank you Steve.
Speaker Change: Sustainability and environmental stewardship, we remain critical to our mission at Westlake.
Speaker Change: I wanted to take a moment to recognize some of our key accomplishments.
Speaker Change: In 2020 fault to advance our sustainability efforts.
Speaker Change: Examples include <unk>.
Speaker Change: Firstly being recognized by the polymers for Europe.
Speaker Change: As the winner of the Decarbonization category.
Speaker Change: 2020 for polymer producer awards.
Speaker Change: For its efforts to reduce C O two emissions.
Speaker Change: Also beginning a pilot program with a leading U S hospital chain to source post consumer recycled PVC matane.
Speaker Change: And also investing in Universal mother, which has pioneered and patented technology that transforms carbon waste streams into high quality graphene for use in industrial products.
Speaker Change: These are just a few examples of ways that Westlake is working to increase the sustainability of our products and improve the environment.
Speaker Change: Before we open the call for questions I wanted to provide some closing thoughts.
Speaker Change: <unk> 24, and our current outlook for 2025.
Speaker Change: Okay.
Speaker Change: 2024, it was another record year for hip segment.
Speaker Change: Which did an amazing job growing sales and earnings.
Speaker Change: Our demonstrated strength in our brand offerings have building products and broad geographical position across North America.
Speaker Change: Serving our customers with an innovative product pipeline.
Speaker Change: Our reasons that support a constructive outlook for this segment in 2025.
Speaker Change: Yeah.
Speaker Change: This provides overall stability to Westlake earnings and cash flows while exemplifying our disciplined capital deployment track record.
Speaker Change: Turning to <unk> segment.
Speaker Change: We see continued demand growth in our end markets, such as packaging coatings light weighting and materials and construction.
Speaker Change: Our differentiated product portfolio combined with our globally advantaged feedstock and energy position.
Speaker Change: At a high level of vertical integration provides.
Speaker Change: <unk> provides us a strategic advantage to deliver value to our end market customers and remain globally competitive.
Speaker Change: While we recognize the global macro economic backdrop as some uncertainties overhanging demand growth in 2025.
Speaker Change: We are focusing on actions that are within our control.
Speaker Change: And which improve our businesses.
Speaker Change: We have taken proactive steps.
Speaker Change: To reduce our cost structure and right size, our epoxy European epoxy asset footprint and.
And reinforce our long term competitiveness throughout the cycle.
Speaker Change: We expect to deliver $125 million to $150 million in.
Speaker Change: And cost reductions in 2025.
Speaker Change: And we'll maintain a disciplined and balanced approach to the allocation of capital.
Speaker Change: We will continue to optimize our business to drive operational performance and reduce cost.
Speaker Change: Finally, as 2025 unfolds, we will look for new opportunities to redeploy our solid investment grade balance sheet.
Speaker Change: Our net debt is less than one time trailing EBITDA.
Speaker Change: We continue to view, our solid balance sheet with ample borrowing capacity is a strategic advantage.
Speaker Change: With industry, leading financial flexibility to Opportunistically.
Speaker Change: Pursue growth options.
Speaker Change: Our focus in 2025 will be.
Speaker Change: Upon being disciplined stewards of shareholder capital.
Speaker Change: As you have come to expect of us.
Speaker Change: Thank you very much for listening to our fourth quarter earnings call.
John: Ill turn the call back over to John.
Speaker Change: Thank you John Mark 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 we will provide.
Speaker Change: That information again at the end of the call to Wanda we will now take questions.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of John Mcnulty with BMO capital markets. Your line is open.
John Mcnulty: Yeah. Good morning, Thanks for taking my question so.
Speaker Change: So I guess the first one would just be on the hit margins. It looks like Youre looking for a little bit of margin degradation. As we look to 2025 I guess can you help us to think about the dynamics behind that especially in what looks to be a growth environment for you at least for your platform.
Steve Bender: Yes, good morning, John It's Steve and so as you think about the guidance. We provided from a revenue you can see that we do expect to see growth in our products, but I'd say the guidance that we're providing in our margin and the EBITDA margin is really more of a product mix shift.
Steve Bender: That we're expecting to see as unique as you can see we have a broad array of products and we do expect there'll be a change in <unk>.
Steve Bender: A slight change in that mix, which might have some impact that's the guidance and our margin.
Speaker Change: Got it okay. Thanks, thanks for the color on that and then on the on the 125 to 150.
Steve Bender: <unk> of cost cuts that youre looking for this year.
Steve Bender: It sounds like a lot of it is going to be in the Perm segment, but can you just confirm kind of roughly how you see that mix playing out by division.
Steve Bender: Yes, I'd say you know there will be continued efforts in both sides of our business, but I would say that area since in areas such as in logistics and procurement are going to be areas that are going to be.
Steve Bender: The big contributors those do impact not only the perm side, but also the hip side of the business. So there is efforts to really look to optimize the footprint of the business and in doing so there'll be opportunities to get benefits. Both in logistics procurement and then overall SG&A and just managing our budgets much tighter and tightening that belt.
Steve Bender: Got it thanks very much for the color.
Steve Bender: Thank you and welcome.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Patrick Cunningham with Citi. Your line is open.
Speaker Change: Hi, Good morning, we've heard over the last few weeks you know a bit of a tougher outlook for some of the homebuilders. There may be some suggestions of a more hawkish fed any concerns. This leads to further volume pressure on your end or is this sort of what youre kind of seeing in your mix declines and maybe if you could comment on the areas of strength, whether its R&R pub.
Speaker Change: Infrastructure benefits from PVC or that kind of gives you confidence in that 5% to 7% target for the year.
Speaker Change: Yes, we do continue to see some some growth and you can see that we're.
Looking at consultants, we see one three which was similar to starts and.
Speaker Change: In 2024 being somewhere to what we expect in 2025, certainly that I think that is the commentary you're hearing from many of the builders, but I would say that we have confidence in the team and you can see that we're guiding to really have a growth and market penetration in this space and so as we think about having the opportunity to grow.
Speaker Change: Our overall platform geographically and from a product perspective, we continue to think that we'll see good growth in overall revenues and as I mentioned earlier in my comments I do think there'll be some product mix that could cause some compression in the delivery margin that we had in 'twenty four but certainly we're working very diligently to see what we can do to.
Speaker Change: To keep that margin as strong as possible given the market dynamics.
Speaker Change: Understood and then just a question on tariffs specifically on PVC have you seen any impact on trade flows from some of your existing atvs and tariffs against the U S and do you expect potential for these tariffs and maybe even retaliatory tariffs down the road two youll have a negative impact on us.
Speaker Change: Exports.
Speaker Change: Yes, so we're certainly watchful of the potential impact of incremental tariffs that could arise in any retaliatory tariffs that may come from other trading partners, but to your question we have seen.
Speaker Change: Products shift in terms of trade patterns all throughout the course of this past year or so and I do expect that should there be additional tariffs or countervailing tariffs that there could be changes and product flows as well.
Speaker Change: It's something that we'll just have to continue to monitor and react to as circumstances develop.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Our next question comes from Manav Salvator Tiano with Banc of America Securities. Your line is open.
Speaker Change: Thank you very much firstly I wanted to go back to your guidance and you mentioned that the margin Nishu is mostly shakes too in the mix. So personally kind of elaborate that'll become you know what are these products or do you expect to gain share versus what may lose share or you may not grow as much.
And secondly, you know last year, you started with similar guidance, perhaps section even lower on the margin front and you delivered 24% EBITDA margin. So.
Speaker Change: You know how conservative I guess would be the simple way to ask is this guidance at a website opportunity for upside here as we saw last year.
Speaker Change: Yeah, well clearly as we think about the guidance. We provided historically we've tried to give you some clarity in terms of how we see the year progressing in this early stage.
Speaker Change: February we do expect that the business will continue to see as I say that one 3 million starts as as we've seen from consultants, but I think.
Speaker Change: The guidance, we're providing and so I think in line with a rather conservative approach that we've taken historically and so certainly there are mix of products that are in our portfolio that have stronger our restaurant portfolio margins in those and so as we think about the approach that we're taking in the marketplace, we're going to remain competitive and there is a degree naturally.
Speaker Change: Conservatism in our outlook as we look forward into 'twenty five given the relatively flat housing start numbers, we have for this year relative to last.
Speaker Change: Okay perfect.
Speaker Change: So I wanted to ask specifically about about pipes from feeding that was that.
Speaker Change: And melt in your presentation about the word competitive pressures there and I believe that has been the main source of margin.
Speaker Change: Margin upside for you in the past couple of years. So can you elaborate that a bit more on what's going on there whether it's a lower demand on increased or increased supply.
Speaker Change: And what's kind of your outlook for 24 versus 20.
Speaker Change: For 25 years plenty for specifically for this product.
Speaker Change: Well you can see from our prepared remarks, we partner or we called out both pipe and fittings siding and trim as strong contributors in the fourth quarter of course, there has been some additional capacity in the marketplace, but we continue to see that our portfolio being broad and deep and having a broad geographical fit allows us to address market demand.
Speaker Change: And as market situations in these various geographics geographical markets play through this year.
We remain I think very constructive in our outlook and the hip side of the business and think that that broad portfolio as well as that broad geographical footprint provides us the opportunity to meet demand wherever it might be it on the west to the southeast of our west or the northeast.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of David Begleiter with Deutsche Bank. Your line is open thank.
David Begleiter: Thank you and good morning.
Speaker Change: Just wondering can you help us with the.
David Begleiter: The bridge from Q4 to Q1, given the FIFO impacts.
David Begleiter: The Petro one outage higher ethane prices and other drivers.
David Begleiter: Yes, David as you think about that certainly as we saw some significant headwinds both in feedstocks as well as on overall pricing.
David Begleiter: At the end of this past year and certainly with some of the.
David Begleiter: Pricing dynamics that you've seen in the first few months of the new year. So clearly you understand in a falling price environment, we certainly face a headwind given our FIFO approach and so as we think about the outlook. We continue to see strength really and some of the feedstocks and we'll continue to see price nominations to address that <unk> seen price.
David Begleiter: Combinations and many of our product our product portfolio offerings, polyethylene, PVC and caustic and others and these are all designed to address both the demand picture, we are seeing as well as some of the input cost pressures. We're also seeing.
Speaker Change: Very great interest our Pax you Steve can you address your performance in Q4 and your expectations for at least maybe the first half of the year.
Speaker Change: Yes, So I would say David you know that that business continues to see some improvement I think you're well aware of the actions that we've seen both in Europe, and the United States with any dumping provisions and I would say that we've also seen a result of some of those actions improvement in overall demand and I would expect to see that.
Speaker Change: New into 25, I don't see certainly the recovery, we would like to see until we get beyond 25, but I do expect the trends will improve.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Cristina <unk> with Jpmorgan. Your line is open.
Speaker Change: Okay.
Jeff Zekauskas: This is Jeff Zekauskas.
Speaker Change: Can you tell us what the volume and price change was for the year in each of your two segments.
Speaker Change: Yeah, So Jeff good morning, and so when you think of the volume changes that we saw really in the Perm side, we saw for the year year over year about a 6% improvement in volumes and Pam and about an 8% improvement in hip.
Speaker Change: Again this is 24.
Speaker Change: 23.
Speaker Change: And price.
Speaker Change: Price was down in Perm, it was down about 12% and down about 6% per hip.
Speaker Change: Okay and.
Speaker Change: Think about your.
Speaker Change: Your 10 business is your EBIT was negative.
Speaker Change: What does that come from Ms that PVC that is what businesses inside of Perm had negative EBIT.
Speaker Change: And so Jeff why we don't break down the discrete strategic business units within Perm I would say that we certainly saw pressures in that Chlor vinyls chain.
Speaker Change: And so I would say that the biggest pressure was really on the vinyl side of that our vinyls chain really in the vinyls chain and less so on the caustic chlor alkali acu side of that chain.
Speaker Change: Okay great.
Speaker Change: Thank you very much.
Speaker Change: Youre welcome.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the lineup Alexi <unk> with Keybanc capital markets. Your line is open.
Speaker Change: Thanks, and good morning, everyone.
Speaker Change: Free cash flow in 'twenty, four was relatively modest compared to EBITDA.
Speaker Change: Income could you provide any.
Speaker Change: Any outlook for 'twenty five.
Speaker Change: As a percent of EBITDA and net income or any other way.
Speaker Change: Yes, so actually I do expect that with the continued.
Speaker Change: Strength that we're seeing really in the hip business and some of the pricing action that we've seen on the Perm side, certainly that will pull some on.
Speaker Change: Working capital and we certainly gave some guidance for Capex this year, but I do expect a stronger performance really in the free cash flow generation in 2025, we've seen strength continued as John Mark had in his comments.
Speaker Change: A number of years five years growth.
Speaker Change: Performance on the hip side of the business.
Speaker Change: As I mentioned earlier, we've seen price initiatives across the product spectrum, and our Perm business yes.
Speaker Change: We've certainly seen volume pick up which is the driver behind the price initiatives and so certainly I do expect that we'll see stronger growth in our free cash flow generation in 'twenty five.
Steve Bender: And maybe as a follow up to that Steve.
Steve Bender: As you are growing your business is that the business that requires more working capital than that.
Steve Bender: Will it be more capital intensive than perhaps your free cash flow conversion.
Steve Bender: Would be lower as that business grows going forward.
Steve Bender: No. It actually is a asset light business relative to the Perm side of the house. So it does not require that large on a percentage basis.
Steve Bender: Inventory or working capital relative to the Perm side of the distance.
Steve Bender: Great. Thanks, a lot.
Steve Bender: Youre welcome.
Please standby for our next question.
Speaker Change: Our next question comes from the line of John Roberts with Mizuho. Your line is open.
Steve Bender: Thank you very much.
Speaker Change: On the Pam, 1% volume growth you mentioned that export polyethylene was up so presumably the rest of the business had flat to down volume.
Speaker Change: <unk> was down could you maybe give us some volume commentary on the other parts of the <unk> portfolio.
Speaker Change: Yes, John we don't usually break out by strategic business unit those components, but it's it's clear when you think about the contribution said some of the headwinds we saw were in the core vinyls chain. So as I mentioned earlier to one of the one of the questions really on the core vinyls chain and that's really where we saw some pressures.
Speaker Change: Not only all in price, but also in volumes.
Speaker Change: Well, the Louisiana tax law change affect the go forward taxes at all.
No the guidance I provided a 23% really.
Speaker Change: The changes.
Speaker Change: That were made and as I mentioned earlier in my prepared remarks, certainly we are in discussion with the state about their allocation. They are apportionment allocation to see what we can do to mitigate the economic impact of those recent legislative changes.
Speaker Change: Okay. Thank you.
Speaker Change: Youre welcome.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Michael <unk> with Barclays. Your line is open.
Great. Thank you good morning, Tim.
Speaker Change: I wanted to go back to the hip revenue guidance at the midpoint I believe it's about 4% growth year on year, how should we think about the relative price and volume contributors to that should we expect price to continue to be a drag in volume to be up.
Speaker Change: Of that 4% number or just how should we think about that.
Speaker Change: It's this.
Speaker Change: This business is very much a regional business and in terms of how we think about the discrete markets and so you can see we're guiding up on revenues.
Speaker Change: And the conservatism that you see in our in our guidance for margin and EBITDA margin. It was really reflective of the fact that we see a relatively flat number of starts in 'twenty five relative to 'twenty, four and likely a change in some product mix given the earlier dialogue that we're having with our distributors who are servicing these builders.
Speaker Change: So as we think about the outlook, we continue to see really a strong performing business.
Speaker Change: Hip and expect it to continue performed quite well in the coming year.
Speaker Change: Okay, but I guess my question was do you expect price to be negative and 25 are now.
No I think what Youre seeing really is certainly some cost creep coming through on the vinyl side of the business and we fully expect to be able to handle that through price nominations in our vinyl related building products and certainly some of the other inflationary costs coming through in our other components I do expect that we'll be able to deal.
Speaker Change: With that in discussions with our distributors for our products.
Speaker Change: Okay Fair enough and then just bigger picture you have a very nice building products business, that's growing within Westlake Corporation, you highlight the successor in a new slide in this deck, but your stock price and your equity valuation today is currently trading cheaper than many of your commodity chemical peers I guess.
Speaker Change: How do you think about addressing or closing that valuation discrepancy such as <unk>.
Speaker Change: Through buybacks separating the company or just other means.
Speaker Change: So when you when you think about the value contribution that our hip side of the business is delivering when you think about the overall enterprise value that is there actually an investor today is actually getting the perm side of the business frankly for free and I think therefore, it reflects the fact that we're really being significantly.
Speaker Change: Undervalued as an enterprise.
Speaker Change: So as you've seen the very strong performance in our business not only this year and hit that over the last five years and you've seen the guidance, we're providing for the current year of 2025 and I think the market is just frankly undervalue in the entire enterprise for the business.
Speaker Change: Alright, Thank you very much.
Speaker Change: Welcome.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Kevin Mccarthy with vertical Research partners. Your line is open.
Kevin Mccarthy: Yes, Thank you and good morning.
Speaker Change: Steve just to follow up on the comment that you just made.
Speaker Change: How would you describe the amount of patients that management would have an enduring.
Speaker Change: Ali undervalued enterprise in the past I think you've extolled the virtues of of integration right upstream in hip and downstream for that matter, but if this sort of.
Speaker Change: Valuation disconnect were to persist.
Speaker Change: Might you take action in terms of separating the businesses at some point in the years to come.
Speaker Change: So Kevin I understand the question then when you think about the integration that we see.
Wide number of benefits of that product integration between the Perm side on the hip side of the business and so certainly we all recognize that the perm side of the business has been in an extended trough, but youre actually seen some price initiatives here to address some of the prices that were that were given up in.
Speaker Change: Earlier, this year and last year, So I think as those demand volumes begin to pick up on the perm side and our prices begin to reflect that increased demand and frankly increased input cost in the form of ethylene and ethane.
Speaker Change: Believe the market will begin to recognize the real strength and the leverage that the earnings leverage that we have embedded in the perm side of the business I think the hip side of the business. We expect to continue to perform very well in 2025.
Speaker Change: But I think the market is underestimating the earnings leverage that we have in the Perm side of the business as we see volumes and pricing action began to unfold as we would expect in 2025.
Speaker Change: Fair enough.
Speaker Change: Wanted to ask about the recent months.
Speaker Change: So I appreciate you're reporting the fourth quarter results, but here on the 24th of February I was wondering if you could comment on your recent.
Speaker Change: Demand experience and major product lines like polyethylene and PVC.
Speaker Change: In January and February relative to normal seasonality.
Speaker Change: Is that on par or any better or worse than you might have previously anticipated.
Speaker Change: No I think it's good question, Kevin and so as you think about and I'll start first with polyethylene as you think about our polyethylene.
Speaker Change: Business, we've continued to see good strength in demand on that front and I think youre aware that we've had price initiatives out in January and February and now March four for polyethylene and while not all of those have yet settled February has not settled nor of course March that is reflective of.
Speaker Change: Good demand of course, there is some cost creep foreseen in our inputs, but I think it's also reflective of the export market that we're seeing and that's really the strength behind these price nominations in polyethylene.
Speaker Change: Likewise, when you think about our caustic businesses. We've also seen a series of announcements by others as well as our own that will go into effect in April of this year.
Speaker Change: May be aware that we've made some nominations of price and again, that's based really on the strength, we're seeing across the space in the business, but certainly also coming from the alumina side, which is a significant absorption market for for caustic soda. So when I think about PBC.
Speaker Change: Heard my comments around building products and of course that it's going into pipe and siding and trim, which is pulling on PVC volumes. So we've also made nominations in February and March for price increases in our vinyl resin and we do think the strength, we're seeing downstream should help us with some of those price nominations in vinyl.
Speaker Change: Perfect. Thank you very much.
Speaker Change: Youre welcome.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Josh Spector with UBS. Your line is open.
Josh Spector: Yes, hi, good morning, Steve I wanted to ask about the price declined sequentially and Pam in terms of the way you posted it seems to be a decent amount lower than some of the headline prices that have been out there I assume a decent chunk of that is he served more to the spot market in the contract market as you normally do seasonally but I'm curious if you could.
Josh Spector: Answer did you sell more into the spot or export markets than you typically do and how do you expect that to trend over the next couple of quarters is that mixing tam potentially a tailwind over the next couple of quarters.
Josh Spector: No, it's not really a mix between export and domestic sales.
Josh Spector: It may be more of a product mix than it is necessarily an export versus domestic mix because many of our peers don't have the degree of product mix that we have in our cost takes an arc chlor vinyl polyethylene portfolio.
Speaker Change: Okay understood. That's helpful. If I could just ask one other on pricing.
Speaker Change: The main consultants did a pretty big adjustment to contract posted prices and sometimes when this is done there is some other discounting behind the scenes. There's some other moving parts. Just curious if you can comment on your realized price on domestic markets in PVC and if that had any impact either in the quarter, whereas you look at the next couple of quarters.
Speaker Change: Okay.
Speaker Change: So as we think about and you've seen the results in the fourth quarter across the space, but I would say prospective we look forward into the current quarter. We certainly have seen some of these industry consultants really up there.
Speaker Change: Expectations of settlements in February this month, and certainly their expectation in March so, while we and several of our industry peers have got nominations that are higher than what some of these industry consultants are speaking to I think the fact, they are recently up in there.
Speaker Change: Their expectations and their forecast signals the strength that we're seeing in these markets as well so as we look forward. We're looking forward to settling here at the end of the end of the month in February and.
All products, but also I would say specifically some of the consultants, especially.
Speaker Change: Those that are looking at the demand picture, we're certainly seeing that demand picture, which is why we're moving prices in vinyls Pax seek foster can polyethylene all higher.
Speaker Change: Okay. Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Michael <unk> with Wells Fargo. Your line is open.
Michael: Hey, good morning.
Speaker Change: In terms of hand them I E.
Speaker Change: The 20% to 22% EBITDA margin outlook for 'twenty five.
Speaker Change: Do you see as sort of your trough margin, meaning if.
If housing starts finally improve the home sales timing and part of.
Speaker Change: Does that margin go up from here.
Speaker Change: Yes.
Speaker Change: Well you certainly have seen what we delivered in 2024 and that was a very strong EBITDA margin and certainly as we think about growing this portfolio and its.
Growing the recognition of this portfolio I should say and recognizing the ability to deliver on time. All the time is really giving us an opportunity to have a dialogue with our customers and our customers' customer so while the guidance. This year for 25 is more a conservative guidance as we look forward and somewhat a product.
Speaker Change: Mix. It's also an expectation will continue to grow the business from a revenue perspective, and look to work with our partners our customers to make sure that we can provide products on time all the time.
Speaker Change: Got it and then as a follow up for Pam.
Speaker Change: 24, it looks like a trough year, obviously and it feels like milk folks since then.
Speaker Change: And these areas at 25, it could be another trough year. So do you think.
Speaker Change: Anything gets better in terms of the fundamentals for our Chlor alkali or polyethylene in and Directionally. You said EBITDA just be similar in 2005 versus 24 are there potential for improvement I mean could it get worse.
Speaker Change: Given how the markets are lucky.
Speaker Change: So Mike as you know, we don't provide direct EBITDA guidance for the Perm side of the business, but I do think you've seen from our price nominations here that we're seeing some improvement in overall demand and that price that price action that we've spoken to earlier in the call have also been reflective of that increased demand, but as you know.
Speaker Change: Well, we don't provide direct EBITDA guidance for the current 25 year and Pam.
Speaker Change: Thank you. Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Hassan Ahmed with Olympic Global Advisors. Your line is open.
Hassan Ahmed: Good morning, James.
Hassan Ahmed: Just wanted to go down into the question about so just wanted to go back to the question about <unk>.
Hassan Ahmed: And your recognition.
Hassan Ahmed: <unk> with what you guys are guiding to and have reported within the hip segment.
Speaker Change: I mean, one of the interesting lines that I sort of came across in your prepared remarks was how such a large offtake of PVC resin from the Perm segment goes into the hip segment. So obviously you have lesser exposure to weaker economies. So obviously you're benefiting.
Hassan Ahmed: From this dynamic on the Perm side Youre benefiting from the integration.
Speaker Change: On the hip side of it.
Speaker Change: So clearly separation is out of the question, so again going back to sort of getting a bit more granular around what <expletive> for value recognition to happen is it just as simple as quarter. After quarter, you guys reporting results, which are better than you know both your pen and hip is and.
Speaker Change: The market eventually waking up to that concept.
Mark: Yes, let me take this one so it's mark here so.
Mark: I think one of the really good news that you heard today is the fact that the hip business has been growing for five years.
Mark: Year on year continuously so over the last five years, you've seen the share of that business. Both in terms of sales and earnings to grow in the company and we expect that to continue in the future.
Mark: As you can see in the numbers, we now generate about 50% of the EBITDA in the hip side in PD.
Mark: Around 85% on <unk>.
Mark: Operating income side.
Mark: So these.
Mark: These two businesses do you need to look at them as S.
Mark: Two siblings in the same family and they sure do.
Mark: PVC certainly in.
Mark: In our company and.
Mark: It allows us to really sell some of our product at different point in the value chain and we expect that in the future youre going to continue to see growing providing a very stable foundation for the company with significant growth potential and really good EBITDA margin.
Mark: In general so having said that.
Mark: I think it was mentioned many times today.
Mark: It can be seen a little bit in a trough.
Mark: Situation right now with very strong also in <unk>.
Mark: In Panama, we have a real cost advantage.
Mark: Being way we are situated we are very careful about that because very low SG&A and so as the business bounce back.
Mark: You would see that business, which is cyclical a little bit more in nature to our bonds back can provide really strong.
Mark: Cash flow generation and EBITDA generation in the future so.
Mark: From where we are I think we are.
Mark: A really good position to continue to create value certainly on the hip side and then a bounce back on the pump side. So.
Mark: We really like where we are and we're going to continue to invest.
Mark: In both segments, but certainly with a little bit of a push on the hip side to continue that.
Mark: Five year growth debt.
Mark: We enjoyed over the last over the last five years.
Mark: Very helpful and as a follow up on the Perm side of things if I could.
Mark: Get a bit more specific around our chlor alkali in particular and I understand you know I mean your exposure obviously is far more on the merchant side to the caustic soda market, but you know a couple of consultants have come out with fairly negative sort of views on the near to medium term prospects of Chlor alkali.
Mark: Particularly taking a look at some of the capacity increments that are happening and also we're sort of margin where current pricing for the E. C. U sits relative to the marginal producers and it seems.
Mark: The issue price is still significantly higher than marginal producer economics, suggesting maybe you know.
Mark: Downside in pricing.
Mark: And that to me seems a bit divergent relative to the comments you guys are making on on caustic soda pricing, so what am I missing there.
Mark: Well.
Steve Bender: Steve I'd say one of the one a day.
Steve Bender: Items I tend to pay attention to is truly their price outlook and if you look at their average price for 2025 from one of the larger consultants. They are actually higher than they are for the year of 2024. So while of course, there is some incremental capacity in the marketplace.
Steve Bender: <unk>.
Steve Bender: With two domestic producers, adding some capacity in the current bill over the last two years I would say that the demand picture that we're seeing is reflective of the price nominations that I spoke to earlier.
Steve Bender: And if you look at work with.
Steve Bender: A close eye on the.
Steve Bender: Ending price for the end of this year and the average price for this year they are actually higher than the average price that we experienced in 2024 and so as we think about the market we see everyday in the commercial markets talk to the consultants as well, we actually come away with a view that we think the markets are.
Steve Bender: Constructive than what I heard you asked in your question.
Steve Bender: Helpful, Steve and thanks, Steve and thanks Mark.
Steve Bender: Please standby for our next question.
Speaker Change: Our next question comes from the line of Frank Mitsch Fermium.
Birmingham Research your line is open.
Aziza: Hi, guys. Good morning, it's aziza on for Frank.
Aziza: I had a question on the PVC pipe plant project could you remind us on the timing and associated cost for that construction project.
Speaker Change: Yeah. So so the plant really is expected to come on next year and so we have four mines that will come on as we are.
Speaker Change: Hope to bring on more volume. This is a disease of this facility is in north, Texas in Wichita Falls and allows us truly serve a growing market that we see in the in that marketplace and so we're really excited about that as you may recall were already producing PVC pipe and so it's a market that we're seeing really embraced this.
Speaker Change: I think unique and sustainable product and as you have heard it puts through that throughput is.
Speaker Change: <unk>, a higher incremental volume given the diameter of the pipe and it uses less resin. So it has sustainability and from a market adoption perspective, it's been well adopted and well appreciated which is why we're adding the capacity. So we're looking forward to that startup in 'twenty six.
Speaker Change: Okay, and Steve any comments on how costs are trending on that.
Steve Bender: As he said, we have not announced the capital cost of that project.
Speaker Change: Okay and then.
Steve Bender: Within the corporate EBITDA line.
Steve Bender: 'twenty 'twenty four kind of increased roughly $30 million year over year any comments you can make on 2025 corporate EBITDA.
On the corporate side I would say and you noticed that certainly we do have a significant cash balance and given the upward sloping yield curve, we see in interest rates that that.
Steve Bender: That cash is earning interest until we find a better way to deploy it and so certainly I would say that we're looking for ways to add even greater value than just generating interest income on cash balances.
Speaker Change: Thank you. Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Matthew Blair with T. P. H. Your line is open.
Speaker Change: Alright, Thank you and good morning could you discuss the M&A landscape I know there are few comments looking to alright.
Speaker Change: Alright, how youre looking to deploy capital going forward.
Speaker Change: And you have the nearly $3 billion in cash sitting on the balance sheet as deal flow picked up or is it declining and are you interested in my mouth.
Speaker Change: Monthly and hip.
Speaker Change: Yeah, Matthew it's a good question and I would say that we look at both sides of the business, we look at <unk> assets as well as hip assets, but when you think about those that are going to be able to provide the nearest term upswing.
Speaker Change: See I would say that looking at opportunities to grow the hip business, we'd probably where we would lean in somewhat but it's all about the right value proposition that any asset brings to the table. So if we're presented with good opportunities on the Perm side, we would certainly look very positively towards that so we look at both sides.
Speaker Change: At the house.
Speaker Change: And I would say just the bias in terms of where we see the best upside for the deployment of any asset that's going to generate that free cash flow and given the stage of the.
Speaker Change: <unk> side of the business, it's more likely to see a more stronger earlier contribution on the hip side, but we do look at both sides of the house on a regular basis I'd say the tone continues to be good I would say that the dialogue is constructive with.
Speaker Change: Owners of assets that are looking to divest or redeploy their portfolio.
Speaker Change: And I'd say as we talk to those.
Speaker Change: Those asset owners.
Speaker Change: Their expectations.
Speaker Change: Still probably need to be triangulated in terms of where the market expectations are but I would say theres very good dialogue between ourselves and those those asset owners.
Speaker Change: Sounds good and then the past two years has had a pretty big quarter over quarter improvement in EBIT margins.
Speaker Change: You compare.
Speaker Change: Q4 going to Q1, starting point this year is 19%.
Speaker Change: How likely is it that hip EBIT margin in Q1 25.
Speaker Change: It would be higher than your full year 'twenty to 'twenty, 2% guidance.
Speaker Change: And so Matthew part of this is also a function of how the season weather wise plays through.
Speaker Change: When you think of the the weather typically the construction season starts in.
Speaker Change: February late February through March, but it's very weather dependent.
Speaker Change: So I would say that the dialogue that we're having with many of our customers distributors, but we do talk to the builders directly.
Speaker Change: I'd say they have a positive book to start the year and so we look forward to that but it's very somewhat weather dependent and as you know this business is somewhat regional.
In northern parts of the country will remain cooler and so there may be areas in the northeast to remain cooler where areas down in the Gulf coast or the west or the southeast may have earlier construction season. So we have a.
Speaker Change: And outlook at and you saw my commentary.
Speaker Change: Earlier in our prepared remarks, where we see a good start to the construction season at this stage.
Speaker Change: Spring season.
Speaker Change: Great. Thank you.
Speaker Change: Thank you welcome.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Pete Osterlund Withdraws Securities. Your line is open.
Speaker Change: Hey, Thanks for taking the question.
Speaker Change: Within the hip growth into your infrastructure revenue stream turned positive in the fourth quarter for the first time in several quarters.
Speaker Change: What is your outlook for growth into infrastructure during 2025 relative to your overall guidance for hip.
Speaker Change: Yes, so what do we think about the infrastructure business you know certainly our pipes fittings business and compounds remains very a very good contributor and so you saw that we saw a good contribution than our pipes and fittings business in the fourth quarter and as we think about this being a leading indicator in the construction business, because youre going to put that infrastructure.
Speaker Change: In.
Before you do any other surface work and so we see this as a strong indicator that we expect that the pipes and fittings business shall continue to move forward.
Speaker Change: In a positive manner on the compounds business, which is embedded in that infrastructure component of hip we continue to see that as a nice contributor its performed well remember the markets that we're servicing our wiring cabling automotive and health and certainly we're seeing good indicators from a demand picture in all three of those categories.
Speaker Change: All right I'll leave it at one thank you.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of road from Arun Viswanathan with RBC capital markets. Your line is open.
Arun Viswanathan: Great. Thanks for taking my questions Hope you guys are well.
Arun Viswanathan: So I guess, maybe I'll just ask about the pricing side again and the demand side. So it sounds like from your comments you are seeing from <unk>.
Arun Viswanathan: Potential green shoots slightly better demand, maybe you can just elaborate that on that and Pam what youre seeing there and similarly, I think you've noted that price was down 12%.
And 24.
Speaker Change: And I think you've noted that you expect price to finish the year higher than 25 versus <unk> 24. So would you expect to make up all of that 12% ground.
Speaker Change: And that would be led mainly by the Chlor alkali side I know, our epoxy and vinyl maybe still seems a little bit challenged but maybe you can just kind of provide a little bit more detail on both demand and price and Pam. Thanks.
Speaker Change: Yes, good question and my comment really was higher pricing at the end of this year was more focused on the caustic side, but I would say certainly we've seen price nominations really in caustic and PVC as well as in polyethylene and so as we look forward. The demand picture that we're seeing is supportive of that as well as seen.
Speaker Change: Higher cost come through in the form of ethane and ethylene.
Speaker Change: So as we look forward with those higher cost inputs. So I want to make sure that we try to get these price increases those are important to be able to maintain the kind of the value proposition. These products deliver but I would say we're also seeing.
Good demand, which is why we're looking to also raising prices not all cost push that's a big piece of it but it's also demand picture. So as we think about the conversation, we're having with our customer base. That's what's really driving these nominations across that product crop.
Speaker Change: Great. Thanks for that and then.
Speaker Change: I just wanted to.
Speaker Change: Ask about the potential pending PVC litigation any comments there I know that some of the other players have been.
Speaker Change: I have received a U S Doj subpoena.
Speaker Change: Is that something that.
Speaker Change: You guys have any updated comments on thanks.
Speaker Change: Yes, it's a good question because its an active litigation matter I really can't speak to that and so I just have to leave it there.
Speaker Change: Thanks.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Vincent Andrews with Morgan Stanley. Your line is open.
Hi, This is Joe hinrichs on for Vincent.
Speaker Change: So I was wondering if you think about it.
Speaker Change: Good morning, how do you think about the relative priority of reducing your net short position in ethylene versus potential M&A on the hip side of the business and do you have any color on the cost that it would take to Debottleneck. Your cracker JV to free up capacity. If that's the route you choose to take.
Speaker Change: Yes. It's good question as we think about that we do look at acquiring.
Speaker Change: Additional ethylene in the same context as we look at acquiring any other business.
Speaker Change: So it really is about what kind of value proposition that might might bring.
Speaker Change: Given the the expansions that we have in guidance for that bring additional bcm of the market are buying of ethylene in the market will continue to grow and so it is important that we find a way cost effectively to be able to try to shorten that merchant position in ethylene, but we want to do this in a cost effective value added way so as we.
Speaker Change: Think about that there could be a variety of ways to do that as you mentioned, we could also debottleneck that JV cracker, we have in Louisiana, We certainly would want to look at that and see if our partner would want to participate and so we'd have to then finish our work in terms of getting a fresh look at the cost on a dollar per.
Speaker Change: Pound investment basis as we all know there has been labor inflation of materials cost inflation. So I wouldnt want to rely on anything that we've done in the past couple of years as an indicator of capital cost for that we'd want to refresh that estimate to get a better read in terms of what the capital cost to debottleneck that cracker could be but it typically can be deeper.
Speaker Change: On that call it roughly in the 40% range of that installed capacity today.
Speaker Change: It's a $2 2 billion pound cracker, and we own 50% of that and so if our partner takes there their share we'd only get 40% of our $1. One if they choose not to we can get all of that.
Speaker Change: But we'd have to really refresh our capital estimates to really get a fresher look in terms of whether that makes economic compelling sense to do.
Speaker Change: Great that makes sense I appreciate all the color and on the cost savings plan. So you all mentioned, a 125 million to $150 million of targeted cost savings. This year, what do you expect the cash costs of these savings to be.
Speaker Change: These are straightforward. This is largely a lot of negotiation. So there isn't really a lot of cash outlay in this in this process. So as I mentioned, Nevada. This is procurement activity logistics activity, obviously belt tightening and simply just not spending in some cases.
Speaker Change: And so they're really the cash outlay is pretty minimal and a lot of this is just being much more prudent in this kind of cycle, where we are and tighter negotiation with all parties.
Speaker Change: Great. Thanks, so much.
Speaker Change: Welcome.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen at this time the Q&A session has now ended are there any closing remarks.
Speaker Change: Thank you again for participating in today's call. We hope you will join US again for our next conference call to discuss our first quarter results.
Speaker Change: Thank you for participating in today's waste Westlake Corporation fourth quarter and full year earnings conference call.
Speaker Change: As a reminder, this call will be available for replay beginning two hours. After the call has ended.
A replay can be access via Westlake website.
Speaker Change: Everyone have a wonderful evening. Thank you for joining the call Goodnight.
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