Q2 2025 Westlake Corp Earnings Call
Good morning, ladies and gentlemen. Thank you for standing by, welcome to the West Lake Corporation. Second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's marks, there will be a question and answer session. Please be advised that today's conference is being recorded today, August 5th, 2025 I would now like to turn the call over to your first Speaker today Jean zolar West Lakes, vice president and Treasurer sir you may begin
Thank you. Good morning everyone. And welcome to the Westlake Corporation conference, call to discuss our second quarter 2025 results.
I am joined today by Albert Chao, our executive chairman Jean 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 and essential materials, which we refer to as PM, and materials and housing and infrastructure products, which we refer to as HIP or products.
Today's conference call Will begin with Jean Marc who will open with a few comments regarding westlake's performance.
Steve will then discuss our financial and operating results.
After which Jean Marc, will add a few concluding comments, and we will open the call up to questions.
The Netherlands and temporarily cease operations at a PVC resin production unit in China at the company's 95% owned. Woo joint venture.
We refer to these expense items, which in aggregate were $130 million, as the identified items in our earnings release. And on this conference call.
References to income from operations. Keep it. De net, income, and earnings per share on this call. Exclude the financial impact of the identified items as such comments made on this call will be in regard to our underlying business results. Using non-gaap Financial measures. A Reconciliation of these non-gaap Financial measures to gaap financial measures is provided in our earnings release, which is available in the investor relations section of our website.
Today management is going to discuss, certain topics that will contain forward-looking information. That is based on Management's beliefs, as well as assumptions made by and information currently available to management.
These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties.
These risks and uncertainties are discussed in westlake's form 10K for the year. Ended December 31st 2024 and other SEC filings. We encourage you to learn more about these factors that could lead our actual results to differ by reviewing these SEC filings.
Which are also available on our investor relations website.
This morning Westlake issued, a press release with details of our second quarter results. This document is available in the press release section of our website at westlake.com
We have also included an earnings presentation, which can be found in the investor relations section on our website.
A replay of today's call will be available beginning today, 2 hours following the conclusion of this call.
This replay may be accessed via Westlake's website.
Please note that information reported on this call speaks only as of today, August 5th, 2025. And therefore, you are advised that time-sensitive information May no longer be accurate as of the time of any replay,
Finally, I would advise you that this conference call is being broadcast live through an internet webcast system that can be accessed on our web page at westlake.com.
Now, I'd like to turn the call over to Jean. Marc Gilson Jean Marc.
Thank you, John, and good morning everyone. We appreciate you joining us to discuss our second quarter 2025 results.
For the second quarter of 2025, we reported Aida of 350 million on net sales of 3 billion.
Compared to the first quarter of 2025, sales and Aida increased due to a seasonal increase in sales volume for most of the businesses in our high segment.
Hip.
We performed very well in the second quarter, delivering solid EBITDA of $275 million on sales of $1.2 billion, representing a strong 24% EBITDA margin.
Our results demonstrate that in in an operating environment that has grown more challenging with interest rates remaining, elevated, a diversified and balanced operating model in Hip offers strategic benefits to help deliver performance in this market.
Pipe and fittings sales volume growth benefited from increasing demand for Municipal Water applications.
Driven in part by spending from the 2021 infrastructure Act.
The significant under spending water infrastructure in the United States and the funds from the infrastructure act should continue to provide a solid foundation for our pipe and fitting sales for many years.
Hips, Building Product sales volume was lower than the second quarter of 2024, reflecting. The slowdown in North American residential construction activity,
Pent up demand. Nevertheless is high as people want and need homes.
Hips, building products, business benefits from a balanced portfolio of approximately 50% new construction-oriented sales and 50% repair and remodel-oriented sales.
And this portfolio provides stability in the current housing market.
Turning to Pam.
Earnings and margins were pressured by 2 primary factors.
And unplanned outages.
Which impacted second quarter of 2025 Aida by approximately 110 million.
As we discussed on our first quarter earnings call.
we began the time of our new vcm capacity at our gear site during its plant, turnaround
following the completion of the turnaround in the second quarter Geismar, slowly ramped up its operating rate with production expected to improve during the third quarter.
Second, the cumulative impact of several quarters of soft global manufacturing activity.
Caused growth in global demand for many chemical products to fall short of Industry Supply Editions.
Primarily in Asia and over that time of that period of time.
The resulting Global over Supply in some chemical change has created pressure on Pam's, average sales price and a bit damaging.
In response to these factors, we are taking aggressive actions to improve Pam's financial results.
Aam profitability. Improvement strategy is 3-pronged.
1.
Improving plant prior reliability. We have challenged the teams at the plants to address, reliability and operations. And we are already seeing production improvements during the third quarter.
2.
Reducing our cost to improve our Global competitiveness to during the first half of 2025, we achieved over 75 million of companywide cost. Reductions towards a full year Target of 150 to 175 million.
While we are pleased with this progress, given the protracted nature of the current downturn, we are expanding the scope and nature of our cost reduction efforts to target an additional $200 million of cost reductions.
by 2026.
And third.
Optimizing our footprint or manufacturing footprint?
During the second quarter of 2025, we announced the planned closure of our Pace epoxy site in the Netherlands.
Which will put hypoxi business on a path to profitability.
So, to summarize the quarter, we were very pleased with the continued solid performance of our hip businesses.
I experienced teams our leading product positions, our broad geographical footprint and it diverse position serving, both new construction and repair and remodel to provide valuable earning stability and cash flow to the company.
We also expect at 3, prong PM profitability, Improvement strategy.
To enhance our globally, competitive position and improve Pam's Financial results.
I would like to turn our call over to Steve now to provide more detail on our financial results for the second quarter of 2025 Steve. Thank you, John Mark and good morning everyone.
As a reminder, my comments regarding income from operations ibida, net income, and earnings per share, all exclude, the financial impact of these identified items.
Last week, reported a net loss of 12 million dollars or 9 cents per share in the second quarter on sales of 3 billion dollars.
Net income for the second quarter of 2025 improved by 28 million. Compared to the first quarter of 2025 primarily due to a seasonal increase in Hip sales volumes and margins.
partially offset by an approximately, 30 million dollars, higher impact from planned turnarounds and unplanned outages in Pim
When compared to the second quarter of 2024, net income decreased by 325 million due to higher North, American feed stock and energy cost, and lower average sales price in each segment.
For the second quarter of 2025, our utilization of the 5o method of accounting resulted in an unfavorable pre-tax impact of 13 million in our PM segment, compared to what earnings would have been reported on the lifo method. This is only an estimate and has not been audited.
Before I discuss the details of our segment results. I want to provide some high-level thoughts on the quarter.
Our hips segment performed very well, and we are very pleased with the stability and resiliency of the portfolio of the business that we have assembled.
And the continued Global oversupply in some chemical chains. But the profitability Improvement strategy that we are implementing should result in better performance with an improved cost position.
Moving to the specifics of our segment, performance, our housing and infrastructure product segment produced ibida of 275 million on 1.1%.
When compared to the first quarter of 2025, hit segments, sales Rose, 16% driven by a 14% increase in sales volumes, as a result of growth for pipe and fittings and a seasonal increase in Building Products, demand.
Average sales price, increased 2% sequentially driven by price increase initiatives in building products, and Global compounds to pass through Rising input cost.
The strong sales growth volume.
Drove hip segment, ibida margin to a solid 24% from 20% in the first quarter of 2025.
When compared to the second quarter of 2024 hip ibida, decreased 61 million due to 2% decline in sales volume, and a 1% decline in average sales prices.
The sales volume decline, was driven by lower customer demand in our Global compounds and Building Products business units.
As a result of slower residential construction activity.
That more than was offset that more than offset volume for a pipe and fittings business result of solid demand for growth in the Municipal Water applications.
Our hip strategy is and has remained clear, we're providing our customers with products to address affordability and adapting our product offering and Manufacturing footprint as the market evolves.
Turning to our PM segment. Second quarter sales of 1.8 billion fell by 57 million from the first quarter of 2025 driven by a 6%, decline in sales volume, as a result of a more significant impact from planned turnarounds and outages, as well as export sales volume disruptions created by tariff uncertainty during the second quarter.
Average sales price increased 2% driven by higher chlorine cost of soda and PVC resin prices.
PM segment, EBITDA of $52 million. In the second quarter, there was a decrease of $21 million from the first quarter of 2025, as a result of the 6% decline in sales volume.
On a year-over-year basis, Pam ibida of 52 million was below. Second quarter of 2024. Ibida of 391 million due to 83 million of higher ethane and natural gas cost.
A $67 million higher year-over-year impact from planned turnarounds and unplanned outages.
And a 2% decline in every sales prices driven by lower polyethylene and PVC resin prices.
As Jean Marc mentioned. During the second quarter, we announced a plan to close our epoxy site and peris in the Netherlands.
Since this acquisition in February of 2022, profitability at this sight, deteriorated significantly as a result of higher European feed stock and energy cost due to the war in Ukraine and low-priced Asian exports entering the global market.
As a result.
Furnace experience losses in excess of 100 million dollars a year which drove the June site closure announcement.
Following the peris closure announcement. We believe that our epoxy business is now on a path to return to profitability in 2026.
Shifting to our balance sheet, as of June 3225, cash and Investments, were 2.3 billion. And total debt was 4.7 billion with a staggered. Long-term, fixed maturity debt schedule, for the second quarter of 20125, net cash provided by operating activities was 135 million while capex. Expenditures were 267 million. We continue to look for opportunities to strategically deploy. Our balance sheet in order to continue to create long-term value.
Now, let me provide some guidance for your models. We've completed our turnarounds and vcm tie in at Geer. However, our integrated for vinyl system is continuing to slowly ramp up production during the third quarter.
We expect 4 vinyls production sales volumes to be better in the third quarter. And thus we anticipate the impact to earnings from production disruptions in third quarter will be less than we experienced in the second quarter.
Beginning of the year. We now, expect 2025, housing and infrastructure, products Revenue to be in the range of 4.2 to 4.4 billion, with an ibid on margin between 20 and 22%.
We continue to expect total cap expenditures for the company to be approximately 900 million.
in the first half of 2025, we achieved over 75 million dollars toward our 2, 2025 companywide savings, Target of 150 to 170 million
and we're taking actions to drive an additional 200 million dollars of cost reductions by 2026 as part of our Pim profitability Improvement, plan for the 2025 year, we expect cash interest expense to be approximately 160 million
Over to Jean Marc to provide a current outlook for our business. Sean. Mark
Thank you, Steve. And against the backdrop of
soft microeconomic conditions.
And slower in North American Construction activity are hip team is delivering safe similar to Prior Levels by being a supplier of choice with faster growing building public customers.
Sales volume growth for a pipe and fitting is driven by Mega Trends in water and supported by Municipal infrastructure investment as well as the growing use of PVC pipe in Municipal infrastructure as compared to competing materials such as concrete and ductile iron.
Hip total margins also remain solid and I indicative of the strong value of Our Brands. And the significant value that are service oriented business model delivers to our customers.
Why the long-term outlook for the housing, markets Market remains 5, favor driven by demographics and and other and the supply of homes. We recognize the current volatility and uncertainty and we will continue to execute Our Winning hip strategy in a disciplined manner to enhance the value of our business.
Longer term. We remain very positive on the outlook, for our business, to organically grow at a 5 to 7% compound annual growth rate.
We expect this growth to compose from market growth such as the need for Home Building to recover from a 10 plus years of under building.
And a position as a leading supplier to the faster-growing customers in the market.
We also continue to evaluate opportunities, to grow our businesses.
Through acquisitions.
To broaden our product portfolio, and deepen, our relationship with our key customers.
Overall, we continue to see a very bright future for hip.
Turning to a p segment.
Near-term macroeconomic conditions, show signs of demand stabilizing.
albeit at lower levels than we would like.
ISM. Manufacturing Index.
Readings in the US, Europe and China.
Have fluctuated in a relatively narrow, narrow range at or slightly below. 50, nearly every month this year.
As we look ahead to the second half of 2025, we are seeing stable demand for pen materials, which, combined with improved production rates, should lead to an increase in our paint sales volumes compared to the first half of 2025.
We are responding to the business environment in our PMP segment, and I am implementing a three-prong pain and profitability improvement strategy.
To improve plant reliability, accelerate cost reductions reduction plans to improve our Global competitiveness.
And optimize and Manufacturing footprint.
These actions will mean meaningfully.
Improve a pem segment, profitability and cash flows.
Before I open the call to your questions, I want to close by reminding you of westlake's foundational strength.
Which, which servers really well. These strengths include
A diversified and complementary portfolio. Of businesses have vertically integrated business model.
As we progress through 2025, we will continue to lean on and improve these attributes to continue to create value for our shareholders.
Thank you very much for listening to our second quarter earnings call and I will now turn the call back over to John
Thank you, John Mark, before we begin taking questions. I would like to remind listeners that are earnings presentation, which provides additional Clarity into our results is available on our website and a replay of this teleconference will be available 2 hours after the call has ended.
Gerald, 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, you will need to press star 1 1 1 on your telephone and wait for your name to be announced to withdraw your question. Please, press star, 1 1 1, again please, stand by while we compile the Q&A roster,
Our first question comes from Patrick Cunningham of City. The floor is yours.
Hi, good morning. Thanks for taking my question, a question on the hip guidance, you know, I think previously, you had some price mixed headwinds that had you pointing to the lower end of the margin range and now the sales guide is lower, but the margin guidance is intact, should we still expect margins on the low end or or have some of those mixed headwinds normalized versus your prior expectations?
Yeah, it's a good question and Patrick. And as we think about the guidance, we're providing simply reflecting the realities. We see in the building residential building and construction markets. And so, I'd still guide you to the the range that we provided of 20 to 22%. Obviously, we delivered a strong quarter this year and I would expect we'll continue to see uh continue to see results as we go through the stronger periods of 2 q and 3 Q in the construction year. But our guidance Still Remains really in that 20 to 22% range.
Great and and you know, for that follow-up, you know the biggest change, you know, the Tariff regime has been fresh tariffs on Brazil, the threat of retaliatory tariffs you know, how should we think about the risk to both chloro vinyls and caustic soda? And given this has been such an attractive export market for the industry and for Westlake
Yeah, so Patrick a good question on exports. Let's say, caustic in the Brazil's, you raise, you know, our our sales are direct to customers and the aluminum and paper uh markets and those markets really export markets. So there's an opportunity for them to access Duty drawback. And so we haven't seen really an impact really in that uh, in those tariffs at this point in time, we'll continue to monitor the situation, but we we believe that we're well positioned with those customers.
Great. Thank you. I'll pass it on.
Thank you for your question.
Our next question comes from Duffy Fischer from Goldman Sachs. The floor is yours.
Yeah, good morning guys. Uh, I want to go back to hip if we could. Um so you talked about earlier some areas of hip that we're seeing pricing pressure all other low gauge pipe um could you go through I guess? 2 questions there. What percent of the portfolio do you think is actually seeing kind of excessive competitive pricing versus what part is is holding stable and then just a second part at the midpoint your revenue is now down 5%. Uh, but again, the margins are stable. So why isn't there decremental, uh margin degrading? Um, is there a mixed shift Improvement in there? Just kind of you know, versus first quarter to today, you know, why don't margins change?
You know and so definitely as you think about the the uh commentary we provided. Do you seem really the broad portfolio offering that we have and addressing and adapting to the market conditions within the building products business. You know, continue to call out the strength in our water business. Going into our pipes and fittings business, but continue to recognize that is large, large diameter for water. Uh uh and and that can that business is really be.
In support of them by the infrastructure act as well as state cities and counties.
But certainly, I would say that we've certainly had to position the business and adapt with our compounds business. Our building products, exterior, Building Products, Business Center, pipe business, to the conditions that we see. So the range of the products we think, and the depth of the products we think continue to be able to be addressing this changing and evolving markets.
Versus Q2 from, you know, the ramp-up of the plan. Roughly, how much less hit do you have from that? And what are we operating rates for chlorovinyls, Q2 to Q3? How much do we actually get to improve operating rates?
You know, as you can see in our prepared remarks, that we continue to see improvements quarter over quarter into Q3. But you could also see that we're continuing to ramp up our core vinyl businesses.
Uh, in the third quarter. So, while I see some improvement, we won't be fully clear of this in the third quarter.
Thank you guys.
You're welcome.
Thank you for your question.
Our next question comes from Aeon Visa from RBC Capital Markets. The floor is yours.
Hi. This is Adam on for a room. Thanks for taking my question. Um, you know, if we were to dig a little bit more into bridging into the second half of the year, uh, you know, assuming by the end of the year, some of the land and unplanned turnarounds are backed out.
Do you have any other major turnaround plans at this time? And, of that $110 million impact, approximately how much of that was planned versus unplanned?
Yeah, as you can see, we've taken a a huge effort in the first half of the year with planned outages, but obviously we've had some of these unplanned outages. And so, you know, the great majority of this was the plan turnarounds that you recall. We had an ethylene turnaround, as well as vcm tie-ins in gear. The majority of this was obviously in the planned Arena, as we look into the back, half of 25, we really have gotten beyond the major turnaround activity in 25. And so I don't expect a continuance of these planned events for the back half of this year.
Okay, thanks and, uh, you know, looking at your additional 200 million dollars cost Improvement for next year. Um, how much of that uh, is, is, is that all, uh, peris, uh, included in that the $100 million improvement from that? Uh, and you know, what would the balance be made up of? Is that primarily going to be additional footprint rationalization, or is there some other, uh, you know, headcount headcount reduction included in that as well?
Yeah, thank you for the question. These are really cost reduction initiatives that are across the entire pem footprint. And so as we think about that, it allows us to address uh, cost in in all areas whether they are in contract labor, whether it's in maintenance and wide variety of other areas, but this is across the entire PM footprint and not really targeted solely in the actions that we've taken in our
Peris location.
This is really on top of the actions that we've already taken.
Thank you.
Thank you for your question.
Our next question comes from John Roberts.
Of Ms. The floor is yours.
Great, thank you very much. Um, on m&a could valuations become cheap enough in PM opportunities that you would acquire something significant there or is your m&a focused exclusively over in the hip side.
No, John, it's a good question. We continue to look across the broad spectrum of opportunities, whether they're in the hip segment or in the Pim segment. And that really is the opportunity is really driven by the valuation, uh, opportunity we see in 1 or the other segments. So, if there isn't necessarily a strong bias, 1 of the other, it's really where the most opportunities present themselves, the strongest side of our business, clearly is on the hip side of the business. But clearly should there be value opportunities that we see in chemicals will certainly act on those opportunities as well.
Okay, thank you.
You're welcome.
Thank you for that question.
Our next question comes from Vincent Andrews of Morgan Stanley. The floor is yours.
Uh, thank you and good morning in, in, in Pam, as part of the initiative to improve improve. Excuse me, plant reliability. Will there be a capex component of that either? 1 time in nature? Or is there any risk that your maintenance capex needs to be revised higher.
No, Vincent we uh fully expect that the capital programs we have in place addressed this and this is not a not an issue that requires a large Capital outlay. So nothing incrementally beyond the capital programs that we've been discussing all year.
See a similar margin in Q3 as we saw in Q2, and then sort of the swing factor of where you wind up for the full year is going to be how soft Q4 is.
Yes, the fourth quarter is always uncertain because of seasonal matters. And so we've seen periods of time where we could continue to build through October and November. Uh, so it really is a function of the weather and the demand picture of course, on top of that. But typically, the strongest quarters are the second and third quarters. And we continue to see continued construction activity carrying us through July into August now. And so, I have still an expectation. That third quarter will continue to be that seasonal pattern, that we've discussed, historically.
Perfect, thank you very much.
You're welcome.
Thank you for your question.
Our next question comes from Frank Mitch from premium Research, LLC, the floor is yours.
Uh thank you. Good morning. Um as someone who probably uh ought to go back uh and take a class on tariff impacts 101.
I'm wondering if you could uh, elaborate on the comment.
About your caustic exports to Brazil.
And the fact that, uh, some of that is being processed there and then you'll have duty drawback. So you know, just conceptually how much you know, of the amount that you're exporting of caustic to Brazil, you know how much is subject to, uh, this Duty drawback and and if you could just elaborate on on. What's exactly? That? That all means thank you. Yeah, Frank. Yeah. Frank, you know, it isn't really our, our ability to see in detail how much the paper and aluminum business is exported out of Brazil, but I would say, the great majority of it is as we understand from our customers. So these are direct sales into those, uh, individual customers. And, as we understand the regulations and, uh, opportunities in Brazil, if those products are re-exported out of Brazil, they have the ability to have duty drawback.
And so as long as they're exporting some portion or a majority of the portion as we understand, they're able to then have that Duty drawn back and be insulated from that portion of the export, that's our understanding from our customers. So that would go, it would go to zero. So if Brazil throws on a 50 Cent tariff on Caustic, as long as you know the customer buys your caustic and re-exports out the product that 50 go to to zero is that is that how I we should think about it.
That is how the duty drawback process works in Brazil, correct, as long as those products are exported.
Terrific, uh, very helpful and John Mark, just just curious, you know, you made the comment that you're already seeing.
Plant reliability Improvement here in the third quarter. Uh any any color any any examples that you could provide uh on that?
Yeah.
Yeah, thank you for the question. The um, as Steve said um we we at quite a lot of planned and unplanned outages in the first part of the year and a lot of them. I mean, the big big ones were primarily over the first 3 4 months um of the year. And uh since then um we had additional unplanned outages that have slowed down actually the ramp up of the plants, but we have started to see. I would say sequential increase, uh, on a month-by-month spaces, starting probably around late April, early May so. And that's really what we expecting to continue in the third quarter. And um, and by the end of the year, we will have pretty much everything behind us.
Terrific, thank you so much.
Thank you for your question.
Our next question comes from Alex kerimoff from keybanc Capital markets. The floor is yours.
Good morning everyone. I wanted to go back to hip margins. Uh you revised your your sales guidance down by 7% but maintained the margin. So could you discuss what is uh, going better than expected? Such that, you know, there's no negative operating leverage in this segment.
Continuing to see strength and demand and that infrastructure water requirements. And so, that's really where we're seeing the continued ability to deliver good results. This quarter.
Uh thanks Steve. And uh I was hoping you could give us some sense of monthly Trends uh in Hip orders. Um, have you seen a negative inflection or a thing or are things steady as you went through the summer?
Well, clearly we've seen some reduction in overall uh construction activity over the course of the year. So you're going back to
First and second quarter, we've seen housing starts Trend lower relative to 2024 and so I would say the level we're at today which is roughly 1.3 million starts continues to be that level that we're seeing through the second quarter and we do expect the seasonal effect to play through in the end of the year in fourth quarter. But I would expect that demand level to continue to persist in the third quarter.
Thanks a lot.
Thank you for your question.
Our next question, comes from Kevin McCarthy, the vertical, research Partners, the floor is yours.
Thank you and good morning. Um, if we rewind the clock 3 months, it seems to me that Wall Street analysts generally underestimated the industry operating rates in the ethylene chain, for example.
Uh and perhaps also for weslake, uh, and listening to you today, it sounds like those operating rates and the trade flows are in the process of normalizing. So I was wondering if you could comment on, um, how much harder you might be able to run your crackers and your
Polymer Assets in the third quarter relative to the second quarter is it a low single digit uplift or a high single digit uh percentage uplift or somewhere in between any any guidance on that operating? Leverage Dynamic would be very helpful.
Yeah, so I will take that question. So
If you look at our, uh, cracker, um, since we went to the, uh, the major turnaround at the beginning of the year, these crackers have been out of our crackers, have been running at full capacity. So, uh, and as you know, we're a little bit short. So, uh, in but they're running at full capacity. If you look downstream on our polyline, we're running at pretty high rates too. Since, um, we finished some of the turnarounds.
Um, the issue has been for us more on the chloro-vinyl side. And epoxy, I mean, epoxy, we said we addressed the problem and, uh, by shutting down the site and basically buying um, liquid epoxy resins now from the market and also applying from users from the US. But if you look at the chloro-vinyl um chain, um, the problem is, I mean, the demand is certainly not...
As high as we would like it to be but there is demand in the market and it's pretty stable and it's for us to capture that demand and by increasing our our throughput. So how and and where it's going to stabilize, I don't know. But um we certainly have some leverage by bringing most of our chloro vinyl uh operating units back to what we consider is normal reliability.
Okay, thank you for that. Sean, Mark, and then as a follow-up,
Can you provide an update on your polyethylene, resin pricing Outlook? Uh, for example, have you settled, um, any July contracts in in the US? Um, and, and how much pricing are you seeking for August?
Yeah, so Kevin when you think of polyethylene, you know, we pricing for July has not yet settled but you know, there are a number of price initiatives out for July and for August.
So we have in the industry between 6 to 7 cents announced for July and for August, their announcements range in between 5 and 8 cents for for August. You know, we've seen demand begin to recover, really starting earlier this year, but, um, but for the month of July prices have not yet settled,
And they remain certainly an elevation in ethylene uh as Jean Marc just earlier noted. And so certainly we were looking to recognize it with those elevated Deathwing prices. We need to see some of these increases work your way through the system.
Thanks so much.
You're welcome.
Our next question comes from Michael Cezanne from Wells, Fargo, the floor is yours.
Hey guys, good morning. Um, so for time, you noted that volumes would be better in the third quarter. Um, can you talk about...
Where you think industry margins you know sort of ended to Q, should they be better sequentially in in the various chains? You know, Chloe, polyethylene and such um um, in the third quarter versus the second quarter.
Yeah, so Mike, could you think about the comment I just added in polyeth? We certainly have price announcements out in polyethylene, we have not settled July, we'll see if we get some of those nominations settled in July and into August,
and I would say, in PBC July did settle flat for the, for the month, but there are nominations out for later. This quarter in August, there's a nomination of 3 cents in the industry. So as we think across the, the PE and PBC chains, we've certainly have seen some announcement action, but obviously, we're still waiting to see if those prices take action and take and take traction.
Okay. And then, what do you think about seasonality? Typically the fourth quarter for y'all is the weakest quarter, it's been an unusual year.
So, how do you think about the normal seasonal Trends as we head into the fourth quarter? Given, you know, you've had some tough turnarounds in the second, maybe those don't, those will all go away by the fourth, um, and just directly how you, how you see that unfolding for the second half?
So we think about, uh, and I'll start maybe with the PVC side. The reason we have priced nominations out for August is to address construction needs. As I mentioned earlier, July settled flat. We'll see if we are able to get any traction on pricing again. Ethylene pricing is up, so we're trying to push some of that higher feedstock cost through in our PVC chain. We need to see some of those price nominations get traction to gain margin growth.
As I mentioned earlier, July for polyethylene has not yet settled, and we have price nominations out for polyethylene as well.
When we think about the the caustic side of the equation, we're reaching the peak of demand for chlorine here in Midsummer. And so, as we think about the fourth quarter to your question, we'll begin to ramp down chlorine, uh, requirements as we reach the end of the fourth quarter, and that will tighten up production of both chlorine and caustic soda.
So so really to summarize. Yeah, to summarize the pricing environment. We've got a number of nominations out there, but we've obviously got some pressures on feed stocks.
Got it. Thanks, you're welcome. You're welcome.
Thank you for your question.
Our next question comes from Josh Spectre of UBS. The floor is yours.
Hi. Good morning. Um, first I wanted to follow up on on hip and you've talked about this in various ways, but if I look at your updated guidance, you know, in the first half in Hip sales you were down around 3%, year on year, your second half, hip Outlook is about up. 3% year on year. So curious, if you could talk to 2 things there, I mean 1 the visibility by the markets and then 2, you know, how you think we should think about your performance relative to housing considering, you know, the outlooks gotten worse but you know, maybe your second half Outlook has gotten a little bit better or maybe even unchanged.
When you think about the, the Outlook we have, as you clearly can see adjusted our Revenue guidance down. But I would say the product mix that we have allows us and I'd say the product mix we have is a little bit different product like some of the others, with our pipe and fittings and compounds businesses, you know, the demand that we're seeing really in the infrastructure Water Business. This is coming from the infrastructure Act pass several years ago.
Allows us to be able to address those needs in cities and counties. And I think that is as you can see a nice contributor in the second quarter and we'd expect that to provide a Tailwind over time.
Certainly, in our exterior Building Products business, we've continued to adjust our portfolio and adapt to the affordability issues you hear much discussed.
Needs a 22% that we provided already.
Okay, thanks. And then just one other clarification just around the pace shutdown. So, $100 million drag on a trailing basis. Do you get a benefit in the second half versus the first half from the shutdown? Or is that more of a 2026 effect? Thanks.
It's largely a $26 million impact. There will be some benefit as we begin to wind down and bring the plant down fully later this year. But the biggest benefit really is a $26 million benefit.
Okay, thank you.
You're welcome.
Thank you for your question.
Our next question comes from baves. Notia from BMO. The floor is yours.
Hi, good morning.
They didn't size up the hip segments. Can you size up the municipal water applications market for us? Like, what's the total size? How fast is it growing?
And and if possible what who who are the key competitors that you compete with over there?
Yeah, the large employers in this market really are largely private players. This is the larger diameter PVC business. So, you see that players such as Diamond Plastics are one of the larger players, and JM Eagle is also one of the other larger players in this business. These are the key players really in the larger diameter.
PVC space. We do compete in uh, with other who are non-pvc producers, but these are the large PVC pipe producers.
The market continues to organically grow very nicely. I'd say in the neighborhood of 5 to 7% over time.
And so, as we think about the overall business of our pipe and fittings business, we're the only producer that is producing not only pipes but also fittings to provide the entire integrated kit to meet needs that we see in the Water Business. Addressing municipal requirements to solve water issues.
Got it. And as a
Follow up within this pipes and fittings, I would say, sub-segment.
I believe you mentioned pricing was down year over year, but obviously your overall pricing is up 2% sequentially for the hip segment. Would you say the pricing pressures? We have seen in pipes and fittings are behind us. Or are you still the sequential pricing headwinds there?
No, I'd say we're continuing to deal with Market issues day to day. This is something that we deal with and always deal with day-to-day and each discrete Market in which we operate, whether it is in our pipe in fittings business or in, uh, our building products business, which we're also nice contributors. But you have to be competitive and in that in that competitive market, you have to meet competition. And so, there is certainly, as you've seen resident prices have drifted over. We've seen prices drift in pipe as well.
Thank you.
Thank you for your question.
Our next question comes from Hassan Ahmed from Alba, Global advisors
The floor is yours. Uh, morning gents. Um, you know, a question around, uh, chloro alkalized Supply, particularly within North America. I mean, you know, over the over the last couple of quarters, you know, there's been some fear in the marketplace that they've been some new projects announced. But, you know, I mean, as I look at it, it seems that
You know, there is 1 expansion on the table and Co 2 Greenfield projects and you know 1 of those 2 Greenfield projects doesn't even have an FID and the Expansion Project you know the number out there seems to be a higher than eventually where a l end up. So you know, just just, you know would love to hear your views on what the supply picture looks like through the end of the decade, um, you know, and should it be worrisome or not?
No, I mean I will take the question.
If you look into the, uh, the market, I think that we see some some stability going forward. And I think, probably at the end of the, uh, the decade we're going to start seeing some, some uplifts probably in the in market demand. Um, and yeah, that's the way we look into it right now.
Understood and just, you know, in terms of the the the the the products that you produce be it, you know, on the ethene polyethylene side, B, it on the chloro, vinyl side of it. Um, what Rumblings are you hearing in terms of rationalization of those capacities in China in particular,
See, in China, you would expect that some.
Some that they would be some restructuring. We haven't seen them, we haven't seen, um, too much restructuring. Uh, I cannot predict what's going to happen in the future and, and, and for us, as far as West Lake is concerned, I mean, we need to, um, to adapt and, and make sure that we can operate in an environment like that, and make money in a, in all of our segments in that kind of environment. So, um, I think some of them are running really close to the edge, um, you would expect that they would be some, some restructuring we haven't seen many yet.
Yeah, and I would just add that the NR ndrc is, you know, made some announcements here. But as Jean Marc said we haven't seen any uh, actions yet. But that will take time, that will take time.
Very helpful. John Mark, Albert, and Steve, thank you.
Thank you for your question.
Our next question comes from Peter aand from truist Securities. The floor is yours.
Hey, good morning, thanks for taking the questions. Um, so first, I just wanted to ask what percentage of your volumes in PM were sold into export markets during the second quarter. And how does that compare to what you see as normal and how would you expect that mix between domestic and Export sales to change in the third quarter?
You know, so Pete, when we think about our normalized exports, it varies a little bit by product, but if you look at all those products combined, it's in the 30s mid-30s. Uh, but it does vary by product. Uh, but obviously, when you think about a normalized number, we were, uh, not selling as many pounds in the export Market because of our uh planned and unplanned outage issues in the second quarter.
Great. And then just
go ahead.
Uh yeah, please follow up.
Uh, follow-up question. I had just heard about the $200 million of incremental cost savings that you announced today. Do you have an estimate you can share for the incremental cash outlays that you expect in order to realize these new cost savings?
You know, these actions we believe are reasonable actions that we don't think require a lot of cash outlay. These actions are really going to deliver largely in 2026. She can see we have initiatives already underway, but it's not a large cash outlay.
Thanks very much.
You're welcome.
Thank you for your question.
Our next question.
comes from David, the big letter from
Dush Bank, the floor is yours. Thank you. Uh, Jean-Marc and Steve, of the $110 million of outage impacts in Q2, how much can we add back for Q3?
Yeah, as you heard us earlier speak, David, I expect that, you know, as we slowly ramp up, we're still going to have some carryover from that. As you could see, we had $30 million sequentially from Q1 into Q2. So, I do expect that you cannot add all of that $110 million back, uh, fully in Q3.
But I don't have a number to give you today.
Understood. And now, the new cost savings of $2 million. How much would you view as, um, uh, permanent or structural? How much would be temporary relative to if volumes do come back?
No, I expect these to all be structural, David, and so I expect that $200 million to be structural and really sticky. Therefore, we obviously have to recognize inflation in the market. But frankly, we think these are structural changes that we're implementing.
Thank you.
You're welcome.
Thank you for your question.
Our next question comes from Matthew Deo from Bank of America. The floor is yours.
Yeah, thanks. Okay. And I apologize if you covered this a little bit because I know it's it's been a a bit of a talking point in the discussion today. But you your net short ethylene and have been for a while now. Uh and I know you've been comfortable there.
But as your peers tie up some of the excess position, um,
Prices are moving higher. Uh and I know lionell is maybe delayed here but I think they remain committed to Flex 2 so like does this does this change your view on on how you want to position the business over the next 5 years? Is there any desire to to kind of tie this up?
For us. It's a matter of, um, how much do we want to be short? And and I think if we, um, we always have the opportunity to, uh, to invest, or make some acquisition, or do things like that right now. I think we, uh, we like where we are, um, but it's not to say that it couldn't change in the future. If some opportunities present themselves to reduce that shot, uh, depending on on, on market conditions and if we see the downstream business, um, grow over the next several years. So, um, I think we okay for now. But we will not, uh, we will look at everything that comes our way. Um, if, if we want to redo that short,
Okay, and hip had a had a good quarter. It was definitely better than we were expecting. So I don't want to kind of dig too much on it. But I mean, the flip side to the stable, margins looks like was an 80% decremental margin. Uh, and so I was just kind of just a mix issue or wanted to or tough comps.
Obviously, it might be part of that, but I just want to, uh, get a little bit better sense of what's going on under the surface.
Yeah, so the mix you could see was really, uh, and again, year over year was really driven by the, um, uh, building the exterior Building Products. Not surprisingly, given lower construction activities. So on our compounds and exterior Building Products businesses, volumes were certainly lower given the reality of the.
Construction activity level. So I mentioned the water demand that we're seeing in the infrastructure business with some of the offset to that but not fully offsetting. Some of the weakness, we saw in our compounds and Building Products businesses year-over-year,
For your question again, as a reminder, if you'd like to ask a question, please press *1, 1 on your telephone.
Our next question.
Comes from Matthew. Blair from TPA, the floor is yours.
Hey, good morning and thanks for taking the question. Um just looking at spot PVC prices that are you know almost approaching all-time lows. Could you talk a little bit about the um the global Supply demand outlook for PVC? You know, clearly the demand side is affected by weak construction Trends. But but what about the supply side? How, how much Global capacity do you expect to be added in PVC this year and next year? And what, what are you seeing in terms of the operating rates for China? PVC plants. Thank you.
Yeah. So some, you know, Matthew, when you think about the, you know, the situation in PVC, certainly, you know, a great majority of that does go into construction markets, and certainly the weakness that you've seen in the Asian markets and the European markets continue to really impact kind of operating rates.
You know the issues that we've seen here in construction; we recognize that the underbuilt situation in North America is just that. It's been a long-term underbuilt for over a decade.
And we think the demand picture here is is right for change given demographic demand for housing. But when you think of the global Supply demand balance, we don't see a significant amount of new capacity coming into the market incrementally from where we sit in 2025, you saw some of the comments or heard some of the comments that we made earlier, in terms of some of these markets, some of these producers, especially those in Asia are currently underwater. And I think this is why you're hearing commentary about um the the Asians and and specifically the Endo ndrc talking about some potential rationalization, which could take many many years. But nevertheless, I think the market really needs some demanding to Res to rebound here in the North American European markets, but the Asian markets will take longer to recover.
Great. Thanks Steve. And um, just looking at the the pressures on free cash flow in the quarter. Um it looked like 1 pressure was, was due to another use of working capital. I'm showing a use of working capital year to date of almost 400 million. Would you expect that to, um, completely reverse in the back half of the year? And and I guess if not like what are the factors that would determine whether
You can recover that big use of working capital year-to-date. Thank you.
Yeah, there were a large amount of dollars, really in the payable side, related to the turnaround activity and the unplanned outage activity. And of course, on the receivable side, specifically in Building Products, we saw a build-up in sales and therefore a build-up in receivables. I do expect that to turn in the second half of this year.
Great. Thank you.
Thank you for your question.
That's the time.
Allotted for a Q&A session. Soon, as we come to the end, are there any 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.
Thank you for participating in today's Westlake Corporation second quarter earnings conference call. As a reminder, this call will be available for replay beginning two hours after the call has ended. The replay can be accessed via Westlake's website. Goodbye.