Westlake (WLK) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales were $3.1 billion, with net income of $108 million ($0.83/diluted share); excluding a $75 million mothball expense, net income was $183 million ($1.41/share).

• EBITDA was $505 million, or $580 million excluding the mothball expense; EBITDA margin excluding the item was 19%, down from 23% in Q2 due to outages.

• Q3 results were impacted by $120 million in unplanned maintenance outages in the PEM segment and a $75 million after-tax mothball expense for European epoxy units.

• HIP and PEM segments showed resilience despite hurricane disruptions and market headwinds, supported by strong North American demand and cost-saving actions.

• Cost savings of $35 million in Q3, totaling $120 million year-to-date toward a $125–$150 million full-year target.

Financial highlights

• Net income for Q3 2024 was $108 million ($0.83/diluted share), down from $285 million in Q3 2023, mainly due to lower prices and mothballing expenses.

• EBITDA was $505 million, or $580 million excluding mothball expense; free cash flow was $254 million, with $474 million from operations and $220 million in capex.

• HIP segment EBITDA was $262 million on $1.1 billion sales (24% margin); PEM segment EBITDA was $297 million on $2 billion sales (15% margin).

• Gross profit for Q3 2024 was $499 million (16% margin), down from $586 million (19% margin) in Q3 2023.

• Cash and cash equivalents at quarter-end were $2.9 billion; total debt was $4.6 billion.

Outlook and guidance

• HIP revenue expected to remain $4.3–$4.6 billion for 2024; full-year HIP EBITDA margin guidance of 22% reaffirmed.

• Typical seasonal slowdown expected in Q4 for HIP; PEM costs to improve as outages are resolved.

• Effective tax rate for 2024 now expected at 25% due to mothball expense; capex guidance unchanged at ~$1 billion.

• Petro 1 ethylene cracker turnaround scheduled for late January 2025, expected to last 55 days.

• Management expects continued volatility in energy prices, high interest rates, and inflation to impact margins and demand in the near term.