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Westlake Chemical Partners LP (WLKP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 net income attributable to WLKP was $15.0M ($0.43 per unit) on total net sales of $290.1M; sequentially lower vs Q3 as excess quantity pricing adjustments from deferring the Petro-1 turnaround impacted the quarter, though this did not affect full-year results .
  • MLP distributable cash flow (DCF) was $15.0M; trailing twelve‑month distribution coverage was 1.01x, with management expecting a temporary dip below 1.00x in 2025 during the ~60‑day Petro‑1 turnaround, while maintaining capacity to fund distributions in excess of DCF .
  • Distribution remained $0.4714 per unit (42nd consecutive), supported by stable fee‑based cash flows under the ethylene sales agreement (95% of output sold to Westlake at $0.10/lb margin) .
  • Management highlighted improved third‑party ethylene prices/margins in 2024 and relatively favorable levels into early 2025, positioning for improved cash flows post‑turnaround .

What Went Well and What Went Wrong

What Went Well

  • Opportunistic deferral of Petro‑1 turnaround captured attractive third‑party ethylene margins in H2 2024, improving full‑year DCF and coverage: “By postponing the Petro 1 turnaround we were able to better capture attractive third‑party ethylene prices and margins… which supported an improvement in the Partnership's distributable cash flow and coverage ratio for the full year 2024” .
  • Strong operating cash flow: Q4 2024 cash from operations was $132.5M, up vs Q3 ($126.1M) and Q4 2023 ($107.7M) on favorable working capital changes .
  • Distribution consistency: 42nd consecutive quarterly distribution since IPO; long‑term predictable cash flows via fixed margin ethylene sales agreement underpin stability .

What Went Wrong

  • Sequential earnings pressure: Q4 net income attributable to WLKP fell to $15.0M from $18.1M in Q3 due to the “excess quantities” pricing impact on OpCo’s sales to Westlake arising from the turnaround deferral .
  • DCF declined YoY in Q4 due to higher turnaround reserves and maintenance capital contributions to support Petro‑1, reducing coverage vs Q3 .
  • 2025 coverage guidance: management expects coverage may dip below 1.00x during the ~60‑day turnaround window before recovering, raising short‑term payout sustainability questions despite stated ability to fund distributions from surplus .

Financial Results

Headline P&L and EPS (quarterly)

MetricQ4 2023Q3 2024Q4 2024
Total Net Sales ($USD Millions)$297.273 $276.995 $290.060
Net Income Attributable to WLKP ($USD Millions)$14.299 $18.136 $14.996
EPS per Unit ($USD)$0.41 $0.51 $0.43
Gross Profit ($USD Millions)$100.683 $116.943 $98.584
EBITDA ($USD Millions)$122.196 $139.126 $120.838

Segment Revenue Breakdown (quarterly)

Revenue ComponentQ4 2023Q3 2024Q4 2024
Net sales—Westlake ($USD Millions)$255.306 $215.799 $260.266
Net co‑products, ethylene & other—third parties ($USD Millions)$41.967 $61.196 $29.794
Total Net Sales ($USD Millions)$297.273 $276.995 $290.060

KPIs and Cash Flow (quarterly)

KPIQ4 2023Q3 2024Q4 2024
MLP Distributable Cash Flow ($USD Millions)$16.418 $17.879 $14.958
Cash from Operating Activities ($USD Millions)$107.671 $126.071 $132.469
Distribution Declared per Unit ($USD)$0.4714 $0.4714 $0.4714
TTM Coverage Ratio (x)—1.03x 1.01x

Notes:

  • Q4 sequential pressure was driven by an “excess quantities” pricing impact on OpCo’s ethylene sales to Westlake related to deferring the Petro‑1 turnaround .
  • Non‑GAAP: DCF reconciliations provided; DCF excludes working capital changes and allocates turnaround reserve and maintenance capex .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Distribution Coverage RatioFY 2025 (during turnaround)Long‑term target ~1.1x coverage; Q3 TTM 1.03x Coverage may dip below 1.00x during the ~60‑day Petro‑1 turnaround; sufficient cash/surplus to fund distributions in excess of DCF; expect coverage to recover post‑turnaround Lowered near‑term; maintain payouts
Petro‑1 Turnaround TimingQ1 2025Expected late Jan start, ~55–60 days Began end of Jan 2025; expected ~60 days Maintained timeline
Distribution per UnitQ4 2024$0.4714 per unit (Q3) $0.4714 per unit; payable Feb 25, 2025 Maintained
Third‑Party Ethylene Margins OutlookNear‑termQ3: highest quarterly average in years; Q4 margins lower but low spot volume planned Early 2025 margins “relatively favorable,” should benefit performance once production returns Improved post‑turnaround outlook

Earnings Call Themes & Trends

TopicQ2 2024 (Q‑2)Q3 2024 (Q‑1)Q4 2024 (Current)Trend
Ethylene spot marginsImproved vs 2023; benefiting DCF Highest quarterly average in years; shifted spot sales to Q3 Favorable into early 2025; captured H2 2024 margins by deferring turnaround Improving, supportive
Turnaround strategy & impactPlanned Petro‑1 turnaround; modeled temporary hit to earnings/coverage Deferral to Q1 2025 to maximize margins; minimal Q4 spot volume 60‑day turnaround underway; temporary coverage dip expected, recovery thereafter Short‑term headwind, managed
Distribution & coverage40th consecutive; cumulative coverage ~1.1x 41st consecutive; TTM coverage 1.03x 42nd consecutive; TTM coverage 1.01x; may dip below 1.00x in 2025 Stable payout; near‑term coverage dip
MLP structure/costsMonitoring market interest and levers of growth Considering options; investor appetite evolving Ending MLP for cost reasons “would not be a consideration” Structure affirmed
Growth levers4 levers: increase OpCo stake, acquisitions, organic expansions, higher fixed margin Reiterated stability via contract Continued evaluation of 4 levers Consistent strategy

Management Commentary

  • Stability and predictability: “The stability of our business model and associated cash flows demonstrate the benefit that our ethylene sales agreement… provide the Partnership through predictable long‑term earnings and cash flows” .
  • H2 execution: “By postponing the Petro 1 turnaround we were able to better capture attractive third‑party ethylene prices and margins in the second half of 2024” .
  • 2025 outlook and distributions: “Coverage ratio may dip below 1.00x this year… we estimate that the Partnership will have ample cash and operating surplus to fund distributions in excess of distributable cash flow in 2025” .
  • Structural stance: “While [the MLP] is an administrative cost, the value proposition offsets that… So for cost control reasons, that would not be a consideration” .
  • Growth pathways: “We will evaluate opportunities via our 4 levers of growth… including… expansions of our current ethylene facilities, and negotiation of a higher fixed margin” .

Q&A Highlights

  • MLP structure: Investor asked if ending the MLP would cut costs; management rejected this, citing valuation benefits outweigh administrative costs .
  • Turnaround impact: Expected temporary impact on earnings and coverage during the ~60‑day Petro‑1 turnaround, with coverage to recover post‑turnaround; costs fully reserved/funded .
  • Prior quarters’ Q&A context: Shifted spot volumes to Q3 to capitalize on elevated margins; limited Q4 spot exposure; monitoring investor appetite for MLP equities and distribution growth options . In Q2, discussed half‑half timing and temporary EPS/coverage impacts, plus proactive spot sales earlier in the year .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS/revenue/EBITDA was not available due to access limits at time of request. As a result, estimate comparisons are unavailable. If needed, re‑query can be attempted for next iteration.

Key Takeaways for Investors

  • WLKP delivered stable Q4 results with EPS $0.43 and EBITDA $120.8M, while sequential earnings softened due to excess quantity pricing linked to turnaround deferral; full‑year metrics improved YoY on higher third‑party margins .
  • Distribution durability remains a central pillar (42nd consecutive; $0.4714 per unit), even as management flags a near‑term coverage dip below 1.00x during the 60‑day turnaround, supported by surplus and cash reserves .
  • Post‑turnaround setup is constructive: management cites favorable ethylene spot margins into early 2025 and expects coverage to resume ~1.1x longer‑term, positioning for improved cash flows once production normalizes .
  • Tactical execution added value in 2024 (deferring turnaround, shifting spot sales), evidencing management’s willingness to optimize around market conditions .
  • Structural risk low: management does not plan to end the MLP structure for cost reasons, citing valuation considerations; focus remains on four growth levers (OpCo stake, acquisitions, organic expansions, contract margin) .
  • Trading implications: Short‑term, watch coverage ratio and turnaround progress; medium‑term, re‑rate potential if spot margins remain favorable and DCF rebounds post‑turnaround.
  • Data gaps: Sell‑side consensus unavailable in this run; monitor estimate revisions post‑print for any forecast changes related to turnaround timing/margins.