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WESTLAKE CORP (WLK)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net sales were $2.84B, up 1% year over year; EBITDA excl. identified items rose 7% to $416M as cost actions offset lower average prices; diluted EPS was $0.06 including a one-time $45M ($0.35/share) Louisiana tax law charge .
  • HIP segment delivered 7% volume growth and 9% EBITDA growth YoY; PEM EBITDA improved 9% YoY, but operating income remained negative on lower prices for chlorine, PVC and PE; sequentially, both segments saw price pressure vs Q3 .
  • FY25 guidance: HIP revenue $4.4–$4.6B, HIP EBITDA margin 20–22%, capex ≈$1B, effective tax rate ≈23%, cash interest ≈$160M; planned ~60-day Petro-1 ethylene turnaround began late January .
  • S&P Global consensus estimates were unavailable at the time of analysis; we cannot quantify beat/miss vs Street for Q4 2024. Wall Street consensus from S&P Global was unavailable.

What Went Well and What Went Wrong

What Went Well

  • HIP momentum: 7% YoY sales volume growth in Q4 led by Pipe & Fittings and siding & trim; HIP EBITDA margin improved YoY to 19% and FY HIP delivered record $807M operating income and $1.1B EBITDA (24% margin) .
  • Cost execution: Delivered $50M cost reductions in Q4 and $170M in FY24, exceeding target; management highlighted improved EBITDA from targeted cost actions .
  • Prepared remarks tone: “Westlake generated solid sales volume growth in 2024…HIP segment EBITDA increased more than 10% vs 2023…Westlake was able to increase EBITDA by 7% in the fourth quarter through targeted cost‑reduction actions.” — CEO Jean‑Marc Gilson .

What Went Wrong

  • Price pressure: Company-wide average prices fell 2% YoY and 5% sequentially; PEM operating loss persisted in Q4 on weaker pricing for chlorine, PVC and polyethylene .
  • One-time tax impact: A ~$45M non-cash Louisiana tax law revaluation reduced Q4 EPS by ~$0.35/share; management is engaging with the state to mitigate impacts .
  • Inventory accounting headwind: FIFO use created an estimated unfavorable pretax impact of ~$64M in Q4 amid falling prices, pressuring PEM sequential results vs headline price series .

Financial Results

Consolidated vs Prior Year and Prior Quarter

MetricQ4 2023Q3 2024Q4 2024
Net Sales ($USD Billions)$2.826 $3.117 $2.843
Diluted EPS ($)($3.86) $0.83 $0.06 (incl. $0.35 tax charge)
EBITDA excl. Identified Items ($USD Millions)$390 $580 $416
Operating Income Margin (%)(20)% 6% 2%
EBITDA Margin excl. Identified Items (%)14% 19% 15%

Notes: Q4 2024 diluted EPS includes ~$45M ($0.35) one-time non-cash Louisiana tax law charge .

Segment Performance

Segment MetricQ4 2023Q3 2024Q4 2024
HIP Net Sales ($USD Millions)$946 $1,098 $981
HIP Income from Operations ($USD Millions)$121 $202 $129
HIP EBITDA ($USD Millions)$173 $262 $188
HIP EBITDA Margin (%)18% 24% 19%
PEM Net Sales ($USD Millions)$1,880 $2,019 $1,862
PEM Income (Loss) from Operations ($USD Millions)($664) ($9) ($41)
PEM EBITDA excl. Identified Items ($USD Millions)$201 $297 $220
PEM EBITDA Margin excl. Identified Items (%)11% 15% 12%

KPI and Cash Flow

KPIQ4 2023Q3 2024Q4 2024
Net Cash from Operating Activities ($USD Millions)$573 $474 $434
Capital Expenditure ($USD Millions)$282 $220 $285
Free Cash Flow ($USD Millions)$291 $254 $149
Cash and Cash Equivalents ($USD Billions, period-end)——$2.919
Total Debt ($USD Billions, period-end)——$4.556

Price/Volume Variance (Supplemental)

CategoryQ4 2024 vs Q4 2023 Avg PriceQ4 2024 vs Q4 2023 VolumeQ4 2024 vs Q3 2024 Avg PriceQ4 2024 vs Q3 2024 Volume
HIP-3% +7% -1% -9%
PEM-2% +1% -7% -1%
Company-2% +3% -5% -4%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
HIP Revenue ($USD Billions)FY 2025Not previously provided$4.4–$4.6 New
HIP EBITDA Margin (%)FY 2025Not previously provided20%–22% New
Total Company Capex ($USD Billions)FY 2025Not previously provided≈$1.0 New
Effective Tax Rate (%)FY 2025Not previously provided≈23% New
Cash Interest Expense ($USD Millions)FY 2025Not previously provided≈$160 New
Petro-1 Ethylene TurnaroundQ1 2025Not previously provided~60 days began late Jan New
Dividend per Share ($)Q4 2024Prior quarterly cadence$0.525; payable Mar 19, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
HIP performance and mixRecord HIP EBITDA/margins; strong demand; epoxy mothball plan announced HIP margins down sequentially on weather; still strong; mothball accrual noted 7% HIP volume growth; record FY HIP; FY25 guidance implies margin moderation on mix Growth continues, margin conservatism
PEM pricing and demandStabilization; sequential pricing improvement from Q1 to Q2 PEM pressured by outages; YoY price down; sequential price +1% Price nominations across PVC/PE/caustic; FIFO headwind; Q4 price declines sequentially Early 2025 pricing initiatives
Cost savingsEmphasis on cost initiatives Mothball accrual ($75M) in Q3; reliability focus $170M FY savings (+$50M in Q4); $125–$150M targeted for FY25 Continuing execution
Macro/tariffsFavorable HIP drivers (under-building, infrastructure) Uneven global recovery; preventive maintenance focus Monitoring PVC tariffs and potential retaliatory actions; observed trade flow shifts Watchful on trade policy
Free cash flowWorking capital swings; cash build Operating cash down QoQ; FCF $254M Expect stronger FCF in 2025; HIP asset-light aids conversion Improving outlook

Management Commentary

  • “HIP segment EBITDA increased more than 10% compared to 2023…Westlake was able to increase EBITDA by 7% in the fourth quarter through targeted cost‑reduction actions.” — Jean‑Marc Gilson (CEO) .
  • “We delivered $50 million of cost reductions in the fourth quarter, achieving $170 million of total cost reductions in 2024, exceeding our target.” — Steve Bender (CFO) .
  • “We expect revenue in our Housing and Infrastructure Products segment to be between $4.4 billion and $4.6 billion, with an EBITDA margin of 20% to 22%…capex approximately $1 billion…effective tax rate approximately 23%…cash interest expense approximately $160 million.” — Steve Bender (CFO) .
  • “Early 2025 price increase initiatives are gaining traction in a number of products…supported by stable‑to‑improving demand and feedstock & energy cost inflation.” — Investor presentation .

Q&A Highlights

  • HIP margin outlook: Guidance margin moderation reflects expected product mix shifts; management characterized guidance as conservative vs FY24’s 24% margin .
  • Cost reductions mix: Savings expected across logistics, procurement and SG&A, impacting both PEM and HIP in FY25; minimal cash outlay to achieve .
  • Pricing nominations: Active nominations across polyethylene, PVC and caustic driven by demand and input cost creep; consultants have raised settlement expectations for Feb/Mar .
  • PEM bridge and FIFO: Q4 FIFO headwind estimated at ~$64M pretax in a falling price environment; PEM sequential price declines vs headline series acknowledged .
  • Strategy/valuation: Management reiterated benefits of HIP–PEM integration; sees market undervaluing enterprise and earnings leverage as PEM demand/prices recover .
  • PVCO plant: Wichita Falls PVCO facility targeted to start in 2026 with four lines; capital cost not disclosed .

Estimates Context

  • S&P Global consensus for Q4 2024 EPS and revenue was unavailable due to data access limits; we cannot assess the magnitude of beat/miss vs Street for this quarter. Wall Street consensus from S&P Global was unavailable.

Key Takeaways for Investors

  • HIP remains the earnings anchor with record FY performance; FY25 guidance implies continued growth but margin normalization (20–22%) on mix — supportive for stability but reduces upside vs FY24’s 24% .
  • PEM is at an inflection attempt: active price nominations across PVC/PE/caustic and export demand in PE, but Q4 saw sequential price declines and FIFO drag; watch settlements and feedstock trends through H1 .
  • Cost discipline is a tangible driver: $170M savings in FY24; targeted $125–$150M in FY25 can offset price/mix headwinds and support margins across segments .
  • Near-term operational event: ~60‑day Petro‑1 turnaround in Q1 could modestly impact PEM volumes/margins; monitor timing and ramp .
  • Balance sheet flexibility: $2.9B cash and investment‑grade profile provide capacity for M&A (HIP bias) and strategic moves; dividend maintained at $0.525/share .
  • Narrative that moves the stock: trajectory of PEM pricing settlements and evidence of HIP margin resilience vs guidance are likely catalysts; management’s undervaluation comments and integrated value chain may frame strategic optionality .
  • Watch trade/tariffs: PVC trade flows are shifting; any incremental tariffs or retaliation could reshape export economics — a swing factor for chlorovinyls .