Westlake Corporation 2026 Q2 Earnings Call

Thank you, Dana. Good morning, everyone, and welcome to the Westlake Corporation conference call to discuss our second quarter 2026 results. I'm joined today by Albert Chao, our Executive Chairman, Jean Marc Gilsoul, our President and CEO, John Boext, our Senior Vice President and Chief Financial Officer, Steve Bender, our Special Advisor to the President, 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 PEM or 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 second quarter performance. John will then discuss our financial and operating results, after which Jean Marc will add a few concluding comments, and we'll open the call up to questions.

References to income from operations, EBITDA, 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 10-K for the year ended December 31st, 2025, 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, two 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 fourth, 2026, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay.

I would advise you that this conference call is being broadcast live through an internet webcast system that can be accessed on our webpage at westlake.com. I would like to turn the call over to Jean-Marc Gilson.

Jean-Marc? Thank you, Jeff. Good morning, everyone.

We appreciate you joining us to discuss our second quarter of 2026 results. During the second quarter, we delivered $3.3 billion in net sales and EBITDA of $679 million, which was a substantial improvement from both the first quarter of 2026 and the second quarter of 2025. At a high level, there were really three key earnings drivers in the second quarter. PEM's globally advantaged feedstock and energy position in North America enabled it to expand its integrated margins as its average sales prices benefited from higher oil prices due to the conflict in the Middle East. Our three-pillar profitability improvement plan contributed approximately $150 million to the year-over-year EBITDA improvement.

HIP's 6% year-over-year organic sales volume growth against a backdrop of soft North American residential construction activity drove stable segment EBITDA and demonstrates why we continue to view HIP as a key growth driver for Westlake. I'd like to expand on each of these three drivers in more detail to provide more context on how the quarter played out. PEM's feedstock and energy cost advantage in North America, where over 85% of our production capacity resides, was an important factor in PEM's second quarter earnings improvement. During the second quarter, a spike in global oil price drove significantly higher costs for competitors in higher cost regions like Asia and Europe, which along with tighter global supply-demand conditions, contributed to a 21% sequential increase in PEM's average sales price.

At the same time, PEM's own production costs, which are mostly based on more affordable North American natural gas and NGLs, were largely immune to the spike in oil prices. This allowed PEM to convert to higher global selling prices directly into higher margins and EBITDA. In fact, our natural gas and ethane cost in North America actually declined significantly from the first quarter due to warmer weather and an increase in associated gas from higher U.S. oil drilling activity. PEM also benefited from a 2% sequential increase in sales volume, driven by improved North American demand. Taken together, we believe that PEM's second quarter performance demonstrates the value of PEM's globally advantaged feedstock and energy position, and the substantial earnings leverage that PEM has to a better global supply-demand balance for its products, particularly polyethylene, caustic soda, and PVC resin. Turning now to our three-pillar profitable improvement plan.

The actions that we took last year are generating significant cost savings that are contributing to our EBITDA improvement. Our first pillar is footprint optimization, which primarily consists of the shutdown of our epoxy plant in Pernis, our styrene plant in Lake Charles, and three of our chlor-vinyl plants in the U.S. These shutdowns took place last year, and the associated cost savings from these actions are tracking ahead of plan so far in 2026. For example, our epoxy business has done a complete turnaround from annual losses in excess of $100 million to a return to profitability in the second quarter of 2026. Our North American chlor-vinyl business is benefiting from more streamlined operations with significant logistical cost savings from a more optimized footprint.

Our second pillar, cost savings, is also tracking ahead of plan, thanks to help from our suppliers and a company-wide effort to economize. Our third pillar is plant reliability. While the reliability of our plant in the first half of 2026 was much improved from the prior year, it was not yet where we wanted to be due to residual unplanned outages this quarter. We continue to make progress improving our operations, and most of the production issues were corrected by the end of the second quarter, with the plants running well into July. We continue to target $600 million of combined EBITDA benefit in 2026 from our profitability improvement plan. I would like to thank and recognize the efforts of all our employees as they safely execute our three-pillar improvement plan. Turning to HIP's contribution to the second quarter earnings.

The segment produced its second-highest quarterly revenue in its history, which we view as a significant achievement considering the soft level of home-building activity during the quarter, and a testament to the value of the diversity of our HIP's portfolio. As a reminder, infrastructure makes up a significant portion of HIP's sales and earnings, and this part of the segment has shown solid growth in recent quarters. HIP's second quarter revenue grew 8% year-over-year, driven by solid 6% organic sales volume growth, which translated into stable EBITDA despite cost inflation and a lower average sales price. As has been the case in recent quarters, Pipe & Fittings drove the volume growth. In fact, Pipe & Fittings sales volume grew roughly 20% year-over-year as a result of continued North American infrastructure investments, including the growth in data center projects.

The performance of our housing products business was another bright spot as it outgrew the market during the second quarter due to the strength of our brands, our broad geographic footprint, and our position as a supplier of choice to large national home builders and distributors. In summary, we were very pleased with our overall second quarter results that reflect Westlake's foundational strength, our globally advantaged North American production, our highly integrated business model, our innovative and differentiated HIP product offering, and our strong investment-grade rated balance sheet. While our plant reliability improved, we are making further progress to generate better results in coming quarters. The issues that we experienced in recent quarters are fixable, and our corrective actions are already generating solid return thus far in the third quarter.

Before John Baxt provides more detail on our financial results for the second quarter of 2026, I want to take this opportunity to thank Steve Bender for all of his many contributions to Westlake over the past 21 years as our CFO and wish him the best of luck with his upcoming retirement. I'd like to turn the call over to our Executive Chairman, Albert Chao, to say a few words.