- Record Housing and Infrastructure Products segment income from
operations of $256 million
- Record Housing and Infrastructure Products segment EBITDA of
$327 million
- Net cash provided by operating activities of $696 million and
free cash flow of $451 million
Westlake Corporation (NYSE: WLK) (the "Company" or "Westlake")
today announced third quarter 2023 results.
SUMMARY FINANCIAL
HIGHLIGHTS ($ in millions except per share data)
Three Months Ended September
30, 2023
Three Months Ended June 30,
2023
Three Months Ended September
30, 2022
Westlake Corporation
Net sales
$
3,115
$
3,251
$
3,956
Income from operations
$
349
$
396
$
516
Operating income margin
11%
12%
13%
Net income attributable to Westlake
Corporation
$
285
$
297
$
401
Diluted earnings per common share
$
2.20
$
2.31
$
3.10
EBITDA
$
682
$
690
$
804
EBITDA margin
22%
21%
20%
Performance and Essential Materials
("PEM") Segment
Net sales
$
1,971
$
2,136
$
2,711
Income from operations
$
105
$
215
$
353
Operating income margin
5%
10%
13%
EBITDA
$
339
$
435
$
561
EBITDA margin
17%
20%
21%
Housing and Infrastructure Products
("HIP") Segment
Net sales
$
1,144
$
1,115
$
1,245
Income from operations
$
256
$
190
$
186
Operating income margin
22%
17%
15%
EBITDA
$
327
$
244
$
254
EBITDA margin
29%
22%
20%
BUSINESS HIGHLIGHTS
In the third quarter of 2023, Westlake achieved quarterly net
sales of $3.1 billion, quarterly net income of $285 million and
quarterly EBITDA (earnings before interest expense, income taxes,
depreciation and amortization) of $682 million, including record
Housing and Infrastructure Products (HIP) segment quarterly income
from operations of $256 million and EBITDA of $327 million. The
Company benefitted from resilient North American housing and
infrastructure construction activities and higher operating rates
despite generally lower average sales prices. The third quarter
results included a reserve for an ongoing legal matter, inventory
charges and other items that reduced third quarter 2023 EBITDA by
approximately $20 million.
Sales volumes for Housing and Infrastructure Products increased
7% while Performance and Essential Materials (PEM) sales volumes
increased 2% from the second quarter of 2023. Overall sales volumes
for the Company increased 4% sequentially from the previous
quarter. When compared to the third quarter of 2022, HIP sales
volumes were unchanged while PEM sales volumes decreased 1%,
resulting in a 1% overall sales volume decline for the Company.
Housing and Infrastructure Products average sales prices
decreased 5% while Performance and Essential Materials average
sales prices decreased 10% from the second quarter of 2023. Overall
sales prices for the Company decreased 8% sequentially from the
previous quarter. When compared to the third quarter of 2022, HIP
average sales prices decreased 8% while PEM average sales prices
decreased 26%, resulting in a 20% overall decline in sales prices
for the Company.
In the third quarter of 2023, HIP's operating income margin
increased to 22% from 17% in the second quarter of 2023 and HIP's
EBITDA margin increased to 29% from 22% in the second quarter of
2023, while PEM's operating income margin decreased to 5% from 10%
and PEM's EBITDA margin decreased to 17% from 20% over the same
period of time. When compared to the third quarter of 2022, HIP's
operating income margin increased to 22% from 15% and HIP's EBITDA
margin increased to 29% from 20%, while PEM's operating income
margin decreased to 5% from 13% and PEM's EBITDA margin decreased
to 17% from 21%.
EXECUTIVE COMMENTARY
"The diversity of our business was evident in the third quarter
of 2023 as record quarterly income from operations and EBITDA in
our HIP segment supported our overall profitability, while our PEM
segment results reflected the soft economic conditions in global
markets. Economic conditions were challenging in the third quarter
with higher interest rates weighing on demand and lowering global
industrial activity. Against this backdrop, we were pleased to
sequentially grow both our PEM and HIP segment sales volumes and to
generate record HIP segment quarterly EBITDA. We also made solid
progress with our cost reduction program achieving savings of $30
million in the third quarter and now expect to generate an
aggregate $95-$110 million of cost savings in 2023. Additionally,
in August, we took the important step of increasing our quarterly
dividend by 40%, reflecting our confidence in the Company’s future
and the strength of our business," said Albert Chao, President and
Chief Executive Officer.
"As we enter the fourth quarter of 2023, weak macroeconomic
conditions, including elevated inflation and high interest rates,
remain in place driving softer demand for all of our products and
low sales prices in our PEM segment. Despite this near-term
outlook, we believe our products are well-positioned in each of our
segments. PEM volumes and profitability are supported by our North
American structural feedstock and energy cost advantage, a high
degree of vertical integration and our product diversity. Our
record HIP segment results reflect the strength of our portfolio
and our ability to navigate these challenging market conditions. In
addition to the typical seasonal decline in sales in the fourth
quarter, we expect some impact to sales volume from the elevated
level in borrowing rates. Finally, we continue to seek
opportunities to redeploy our robust free cash flow and solid
balance sheet in ways that enhance shareholder value."
RESULTS
Consolidated Results
For the three months ended September 30, 2023, the Company
reported quarterly net income of $285 million, or $2.20 per share,
on net sales of $3,115 million. The year-over-year decrease in net
income of $116 million from the third quarter of 2022 was primarily
due to lower average sales prices and integrated margins for
caustic soda and PVC.
Third quarter 2023 net income of $285 million decreased by $12
million compared to the second quarter of 2023. The sequential
decrease in net income compared to the prior quarter was primarily
due to lower prices and integrated margins for most of the products
in our PEM segment, partially offset by higher operating rates and
sales volumes.
EBITDA of $682 million for the third quarter of 2023 decreased
by $122 million compared to third quarter 2022 EBITDA of $804
million. Third quarter 2023 EBITDA decreased by $8 million compared
to second quarter 2023 EBITDA of $690 million. A reconciliation of
EBITDA to net income, income from operations, and net cash provided
by operating activities can be found in the financial schedules at
the end of this press release.
Cash and Debt
Net cash provided by operating activities was $696 million for
the third quarter of 2023. As of September 30, 2023, cash and cash
equivalents were $3,057 million and total debt was $4,873 million.
Capital expenditures in the third quarter of 2023 were $245
million. For the third quarter of 2023, free cash flow (net cash
provided by operating activities less capital expenditures) was
$451 million, a decrease of $178 million as compared to the third
quarter of 2022, primarily due to lower net income, but an increase
of $136 million as compared to the second quarter of 2023,
primarily due to more favorable working capital management. A
reconciliation of free cash flow to net cash provided by operating
activities can be found in the financial schedules at the end of
this press release.
Performance and Essential Materials Segment
Performance and Essential Materials income from operations for
the third quarter of 2023 of $105 million decreased by $248 million
from third quarter 2022 income from operations of $353 million.
This decrease in income from operations versus the prior-year
period was due to lower average sales prices and integrated margins
for most of our major products, particularly for PVC, caustic soda
and epoxy resins. While overall sales volumes were in-line with the
prior-year period, PEM's average sales prices were negatively
impacted by both market price declines and an unfavorable sales mix
due to higher sales volumes in export markets where pricing is
typically lower. As a result, PEM's segment operating margin
declined from 13% in the third quarter of 2022 to 5% in the third
quarter of 2023 and EBITDA margin decreased from 21% to 17% over
the same period of time.
Sequentially, Performance and Essential Materials income from
operations decreased by $110 million as compared to the second
quarter of 2023. The sequential decrease was largely due to lower
average sales prices and integrated margins, especially for caustic
soda, and certain charges incurred during the quarter, which were
only partially offset by higher PVC global operating rates and
sales volumes.
Housing and Infrastructure Products Segment
For the third quarter of 2023, Housing and Infrastructure
Products income from operations of $256 million increased by $70
million from third quarter 2022 income from operations of $186
million. This increase in income from operations versus the
prior-year period was the result of lower materials costs. While
overall sales volume remained in-line with the prior-year period,
we experienced solid growth in select categories such as siding
& trim and municipal water systems. HIP's segment operating
margin increased from 15% in the third quarter of 2022 to 22% in
the third quarter of 2023 while EBITDA margin increased from 20% to
29%.
Sequentially, Housing and Infrastructure Products income from
operations increased by $66 million as compared to the second
quarter of 2023. This increase in income from operations versus the
prior quarter was the result of higher sales volume, particularly
for municipal water applications and North American housing
products.
Forward-Looking Statements
The statements in this release and the related teleconference
relating to matters that are not historical facts, including
statements regarding our outlook for the performance of our
business segments (such as product rates), macro demand conditions,
future demand for our products and sales prices, our attempts to
improve controllable costs, and our ability to deploy free cash
flow and to enhance shareholder value are forward-looking
statements. These forward-looking statements are subject to
significant risks and uncertainties. Actual results could differ
materially, based on factors including, but not limited to: general
economic and business conditions; the cyclical nature of the
chemical and building products industries; availability, cost and
volatility of raw materials and energy; uncertainties associated
with the United States and worldwide economies, including those due
to political tensions and conflict in the Middle East and
elsewhere, including the conflict between Russia and Ukraine;
uncertainties associated with pandemic infectious diseases;
uncertainties associated with climate change; the potential impact
on demand for our products due to initiatives such as recycling;
industry production capacity and operating rates; the supply/demand
balance for Westlake's products; competitive products and pricing
pressures; instability in the credit and financial markets; access
to capital markets; terrorist acts; operating interruptions;
changes in laws or regulations, including trade policies;
technological developments; information systems failures and
cyberattacks; foreign currency exchange risks; the ability to
implement our business strategies; and other uncertainties. For
more detailed information about the factors that could cause actual
results to differ materially, please refer to Westlake's Annual
Report on Form 10-K for the year ended December 31, 2022, which was
filed with the SEC in February 2023, and Quarterly Report on Form
10-Q for the quarter ended June 30, 2023, which was filed with the
SEC in August 2023.
Use of Non-GAAP Financial Measures
This release makes reference to certain "non-GAAP" financial
measures, such as EBITDA and free cash flow. A non-GAAP financial
measure is generally defined by the Securities and Exchange
Commission ("SEC") as a numerical measure of a registrant's
historical or future financial performance, financial position or
cash flows that (1) excludes amounts, or is subject to adjustments
that have the effect of excluding amounts, that are included in the
most directly comparable measure calculated and presented in
accordance with GAAP in the statement of income, balance sheet or
statement of cash flows (or equivalent statements) of the
registrant; or (2) includes amounts, or is subject to adjustments
that have the effect of including amounts, that are excluded from
the most directly comparable measure so calculated and presented.
We report our financial results in accordance with U.S. generally
accepted accounting principles ("U.S. GAAP"), but believe that
certain non-GAAP financial measures, such as EBITDA and free cash
flow, provide useful supplemental information to investors
regarding the underlying business trends and performance of the
Company's ongoing operations and are useful for period-over-period
comparisons of such operations. These non-GAAP financial measures
should be considered as a supplement to, and not as a substitute
for, or superior to, the financial measures prepared in accordance
with U.S. GAAP. A reconciliation of (i) EBITDA to net income,
income from operations and net cash provided by operating
activities and (ii) free cash flow to net cash provided by
operating activities can be found in the financial schedules at the
end of this press release.
About Westlake
Westlake is a global manufacturer and supplier of materials and
innovative products that enhance life every day. Headquartered in
Houston, with operations in Asia, Europe and North America, we
provide the building blocks for vital solutions — from housing and
construction, to packaging and healthcare, to automotive and
consumer. For more information, visit the company's web site at
www.westlake.com.
Westlake Corporation Conference Call Information:
A conference call to discuss Westlake Corporation's third
quarter 2023 results will be held Thursday, November 2, 2023 at
11:00 AM Eastern Time (10:00 AM Central Time). To access the
conference call, it is necessary to pre-register at
https://register.vevent.com/register/BIf37d4bda7ce244168b3b62b894d43e67.
Once registered, you will receive a phone number and unique PIN
number.
A replay of the conference call will be available beginning two
hours after its conclusion. The conference call and replay will be
available via webcast at
https://edge.media-server.com/mmc/p/5953h5g5.
WESTLAKE CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(In millions of dollars,
except per share data and share amounts)
Net sales
$
3,115
$
3,956
$
9,722
$
12,495
Cost of sales
2,529
3,180
7,702
8,989
Gross profit
586
776
2,020
3,506
Selling, general and administrative
expenses
206
215
641
635
Amortization of intangibles
31
39
92
124
Restructuring, transaction and
integration-related costs
—
6
6
24
Income from operations
349
516
1,281
2,723
Interest expense
(40
)
(44
)
(124
)
(134
)
Other income, net
56
24
101
52
Income before income taxes
365
496
1,258
2,641
Provision for income taxes
70
84
249
592
Net income
295
412
1,009
2,049
Net income attributable to noncontrolling
interests
10
11
33
34
Net income attributable to Westlake
Corporation
$
285
$
401
$
976
$
2,015
Earnings per common share attributable to
Westlake Corporation:
Basic
$
2.22
$
3.12
$
7.61
$
15.65
Diluted
$
2.20
$
3.10
$
7.56
$
15.54
Weighted average common shares
outstanding:
Basic
127,854,464
127,943,400
127,685,210
128,118,160
Diluted
128,583,927
128,747,012
128,509,618
129,003,750
WESTLAKE CORPORATION
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
September 30,
2023
December 31,
2022
(In millions of
dollars)
ASSETS
Current assets
Cash and cash equivalents
$
3,057
$
2,228
Accounts receivable, net
1,939
1,801
Inventories
1,672
1,866
Prepaid expenses and other current
assets
89
78
Total current assets
6,757
5,973
Property, plant and equipment, net
8,570
8,525
Other assets, net
6,069
6,052
Total assets
$
21,396
$
20,550
LIABILITIES AND EQUITY
Current liabilities (accounts payable and
accrued and other liabilities)
$
2,360
$
2,298
Current portion of long-term debt, net
299
—
Long-term debt, net
4,574
4,879
Other liabilities
2,878
2,908
Total liabilities
10,111
10,085
Total Westlake Corporation stockholders'
equity
10,754
9,931
Noncontrolling interests
531
534
Total equity
11,285
10,465
Total liabilities and equity
$
21,396
$
20,550
WESTLAKE CORPORATION
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September
30,
2023
2022
(In millions of
dollars)
Cash flows from operating
activities
Net income
$
1,009
$
2,049
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
815
785
Deferred income taxes
(67
)
44
Net loss on disposition and others
43
86
Other balance sheet changes
(37
)
(404
)
Net cash provided by operating
activities
1,763
2,560
Cash flows from investing
activities
Acquisition of business, net of cash
acquired
—
(1,171
)
Additions to investments in unconsolidated
subsidiaries
(18
)
(177
)
Additions to property, plant and
equipment
(752
)
(811
)
Other, net
20
11
Net cash used for investing activities
(750
)
(2,148
)
Cash flows from financing
activities
Distributions to noncontrolling
interests
(33
)
(34
)
Dividends paid
(156
)
(123
)
Proceeds from exercise of stock
options
39
17
Repayment of senior notes
—
(250
)
Repurchase of common stock for
treasury
(23
)
(68
)
Other, net
(2
)
(22
)
Net cash used for financing activities
(175
)
(480
)
Effect of exchange rate changes on cash,
cash equivalents and restricted cash
(12
)
(67
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
826
(135
)
Cash, cash equivalents and restricted cash
at beginning of period
2,246
1,941
Cash, cash equivalents and restricted cash
at end of period
$
3,072
$
1,806
WESTLAKE CORPORATION
SEGMENT INFORMATION
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
(In millions of
dollars)
Net external sales
Performance and Essential Materials
Performance Materials
$
1,127
$
1,689
$
3,549
$
5,678
Essential Materials
844
1,022
2,907
2,969
Total Performance and Essential
Materials
1,971
2,711
6,456
8,647
Housing and Infrastructure Products
Housing Products
963
1,018
2,699
3,106
Infrastructure Products
181
227
567
742
Total Housing and Infrastructure
Products
1,144
1,245
3,266
3,848
$
3,115
$
3,956
$
9,722
$
12,495
Income (loss) from operations
Performance and Essential Materials
$
105
$
353
$
723
$
2,197
Housing and Infrastructure Products
256
186
589
607
Corporate and other
(12
)
(23
)
(31
)
(81
)
$
349
$
516
$
1,281
$
2,723
Depreciation and amortization
Performance and Essential Materials
$
225
$
196
$
652
$
572
Housing and Infrastructure Products
51
65
157
206
Corporate and other
1
3
6
7
$
277
$
264
$
815
$
785
Other income, net
Performance and Essential Materials
$
9
$
12
$
14
$
25
Housing and Infrastructure Products
20
3
30
9
Corporate and other
27
9
57
18
$
56
$
24
$
101
$
52
WESTLAKE CORPORATION
RECONCILIATION OF EBITDA TO
NET INCOME, INCOME FROM OPERATIONS AND
NET CASH PROVIDED BY OPERATING
ACTIVITIES
(Unaudited)
Three Months Ended June
30,
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2023
2022
2023
2022
(In millions of dollars,
except percentages)
Net cash provided by operating
activities
$
555
$
696
$
947
$
1,763
$
2,560
Changes in operating assets and
liabilities and other
(283
)
(417
)
(572
)
(821
)
(467
)
Deferred income taxes
35
16
37
67
(44
)
Net income
307
295
412
1,009
2,049
Less:
Other income, net
23
56
24
101
52
Interest expense
(42
)
(40
)
(44
)
(124
)
(134
)
Provision for income taxes
(70
)
(70
)
(84
)
(249
)
(592
)
Income from operations
396
349
516
1,281
2,723
Add:
Depreciation and amortization
271
277
264
815
785
Other income, net
23
56
24
101
52
EBITDA
$
690
$
682
$
804
$
2,197
$
3,560
Net external sales
$
3,251
$
3,115
$
3,956
$
9,722
$
12,495
Operating Income Margin
12%
11%
13%
13%
22%
EBITDA Margin
21%
22%
20%
23%
28%
RECONCILIATION OF FREE CASH
FLOW TO NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
Three Months Ended June
30,
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2023
2022
2023
2022
(In millions of
dollars)
Net cash provided by operating
activities
$
555
$
696
$
947
$
1,763
$
2,560
Less:
Additions to property, plant and
equipment
(240
)
(245
)
$
(318
)
(752
)
(811
)
Free Cash Flow
$
315
$
451
$
629
$
1,011
$
1,749
WESTLAKE CORPORATION
RECONCILIATION OF SEGMENT
EBITDA TO INCOME FROM OPERATIONS
(Unaudited)
Three Months Ended June
30,
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2023
2022
2023
2022
(In millions of dollars,
except percentages)
Performance and Essential Materials
Segment
Income from operations
$
215
$
105
$
353
$
723
$
2,197
Add:
Depreciation and amortization
217
225
196
652
572
Other income, net
3
9
12
14
25
EBITDA
$
435
$
339
$
561
$
1,389
$
2,794
Net external sales
$
2,136
$
1,971
$
2,711
$
6,456
$
8,647
Operating Income Margin
10%
5%
13%
11%
25%
EBITDA Margin
20%
17%
21%
22%
32%
Three Months Ended June
30,
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2023
2022
2023
2022
(In millions of dollars,
except percentages)
Housing and Infrastructure Products
Segment
Income from operations
$
190
$
256
$
186
$
589
$
607
Add:
Depreciation and amortization
51
51
65
157
206
Other income, net
3
20
3
30
9
EBITDA
$
244
$
327
$
254
$
776
$
822
Net external sales
$
1,115
$
1,144
$
1,245
$
3,266
$
3,848
Operating Income Margin
17%
22%
15%
18%
16%
EBITDA Margin
22%
29%
20%
24%
21%
WESTLAKE CORPORATION
SUPPLEMENTAL
INFORMATION
NET SALES PERCENTAGE CHANGE
DUE TO AVERAGE SALES PRICE AND VOLUME
(Unaudited)
Third Quarter 2023 vs. Third
Quarter 2022
Third Quarter 2023 vs. Second
Quarter 2023
Average
Sales Price
Volume
Average
Sales Price
Volume
Performance and Essential Materials
-26%
-1%
-10%
+2%
Housing and Infrastructure Products
-8%
—%
-5%
+7%
Company
-20%
-1%
-8%
+4%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231102732927/en/
(713) 960-9111 Investors—Steve Bender Media—L. Benjamin
Ederington
Westlake (NYSE:WLK)
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