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    WLK
    Earnings call· Jun 2026(Q2 FY26)

    WESTLAKE Q2 FY26 earnings call WLK

    Aug 4, 2026 Source

    Executive summary

    Westlake Corporation Q2 FY26 — Strong Earnings Driven by PEM Feedstock Advantage and Profitability Plan

    Westlake Corporation delivered strong second-quarter results, primarily driven by its Performance and Essential Materials segment's advantaged North American feedstock position and the significant impact of its 3-pillar profitability improvement plan. The Housing and Infrastructure Products segment demonstrated resilience with solid volume growth, though facing margin pressure from cost inflation and a softer residential construction outlook. The company continues to focus on operational reliability and strategic acquisitions to drive long-term value.

    Highlights

    5

    • Net sales of $3.3 billion, a substantial improvement from Q1 FY26 and Q2 FY25.

    • EBITDA of $679 million, a substantial improvement from Q1 FY26 and Q2 FY25.

    • 3-pillar profitability improvement plan contributed approximately $150 million to year-over-year EBITDA improvement in Q2 FY26, tracking ahead of plan.

    • HIP segment achieved 6% year-over-year organic sales volume growth, leading to stable segment EBITDA despite soft residential construction.

    • PEM's average sales price increased 21% sequentially, benefiting from higher oil prices and North American feedstock advantage, driving higher margins.

    Concerns

    3

    • HIP EBITDA margin declined to 22% from 24% in Q2 FY25, driven by lower average sales price and inflation in transportation and raw material costs.

    • HIP expects Q3 pipe sales volumes to be modestly impacted by a pull-forward of orders into Q2 FY26 due to customers securing supply.

    • HIP's 2026 revenue and EBITDA margin guidance lowered to the lower end of previously communicated ranges ($4.4B-$4.6B revenue, 19%-21% EBITDA margin) due to muted North American residential construction and cost increases.

    Guidance & targets

    11
    CategoryTargetConfidence
    HIP Revenue
    $4.4 billion to $4.6 billion
    medium materiality
    Medium
    HIP EBITDA Margin
    19% to 21%
    medium materiality
    Medium
    Total Capital Expenditures
    $900 million
    high materiality
    High
    Cash Interest Expense
    $215 million
    medium materiality
    High
    3-Pillar Profitability Improvement Plan EBITDA Benefit
    $600 million
    high materiality
    High
    PEM Sales Volume
    continue to reflect the same steady global demand environment
    medium materiality
    Medium
    Polyethylene Pricing
    higher than the prior year
    medium materiality
    Medium
    Caustic Pricing
    second half to average higher than the first half
    medium materiality
    Medium
    Chlorine Pricing
    roughly flat
    low materiality
    Medium
    PVC Resin Pricing
    higher than the prior year
    medium materiality
    Medium
    PVCO Plant Startup
    start-up at the end of this year
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Housing and Infrastructure Products (HIP)
    Revenue increased due to ACI acquisition and double-digit sales volume growth in pipe and fittings. Sales volume benefited from solid growth in siding and trim. EBITDA increased by $1 million YoY, offsetting margin decline due to lower average sales price and cost inflation. Sequential growth driven by pipe and fittings (solid end market demand, infrastructure spending, data centers) and seasonal demand for exterior building products.
    EBITDA Margin: 22% (down from 24% in Q2 FY25)Organic Sales Volume Growth YoY: 6%Sales Volume Growth QoQ: 24%Average Sales Price QoQ: 2% increaseAverage Sales Price YoY: 3% decline
    		$1.3 billion8%26%$276 million EBITDA
    Performance and Essential Materials (PEM)
    EBITDA driven by 3-pillar profitability plan benefits and increased average sales price, led by polyethylene and PVC resin. Sales volume growth led by caustic soda and PVC resin YoY, and caustic soda, chlorine, and epoxy resin QoQ. Benefited from globally advantaged feedstock and energy position in North America, with lower natural gas and ethane costs sequentially.
    EBITDA YoY: $364 million increase (vs Q2 FY25)EBITDA QoQ: $380 million increase (vs Q1 FY26)Average Sales Price YoY: 14% increaseAverage Sales Price QoQ: 21% increaseSales Volume YoY (excluding plant closures): 7% increaseSales Volume QoQ: 2% increase
    		———$416 million EBITDA

    Operational metrics

    28
    Total Net Sales
    $3.3 billionsubstantial improvement from Q1 FY26 and Q2 FY25
    Q2 FY26
    Total EBITDA
    $679 millionsubstantial improvement from Q1 FY26 and Q2 FY25
    Q2 FY26

    Excludes financial impact of identified items (non-GAAP).

    Net Income
    $260 millionvs net loss of $12 million in Q2 FY25
    Q2 FY26

    Excludes financial impact of identified items (non-GAAP).

    Diluted EPS
    $2.01vs net loss of $0.09 in Q2 FY25 (calculated from $12M loss / ~135M shares)
    Q2 FY26

    Excludes financial impact of identified items (non-GAAP).

    Cash and Investments
    $1.9 billion
    As of June 30, 2026
    Total Debt
    $5.1 billion
    As of June 30, 2026

    Staggered long-term fixed rate debt maturity schedule.

    Debt Retired
    $500 million
    Q2 FY26

    Remaining debt outstanding on 2026 notes.

    Share Repurchases
    $30 million
    Q2 FY26

    Part of returning approximately $100 million to shareholders through dividends and share repurchases.

    Cash Provided by Operating Activities
    $318 millionmore than doubled from prior year period
    Q2 FY26

    Expects H2 cash flow to benefit from significant release of working capital, particularly in Q4.

    Pipe and Fittings Sales Volume Growth
    20%year-over-year
    Q2 FY26

    Driven by continued North American infrastructure investments, including data center projects.

    Epoxy Business Profitability
    return to profitabilityfrom annual losses in excess of $100 million
    Q2 FY26

    Result of footprint optimization pillar of profitability improvement plan. Driven by strategy to go after higher margin segments like aerospace and electrical, and good production rates in upstream LER.

    Polyethylene Price Increase
    25%
    YTD Q2 FY26

    July not settled yet, August announcements up $0.05.

    Caustic Price Increase
    75%
    YTD Q2 FY26

    Solid demand, H2 expected to average higher than H1.

    Chlorine Price Change
    down
    H1 FY26

    Expected to be roughly flat in H2.

    PVC Resin Price Increase
    9%
    Q2 FY26

    Exited Q2 at or near highest levels for the year. Inventory high but solid demand with pickup in export pricing.

    PEM Production Capacity in North America
    over 85%
    Q2 FY26

    Highlights globally advantaged feedstock and energy position.

    Operating Rate
    100%full out
    Q2 FY26
    Operating Rate
    100%full out
    Q2 FY26
    Operating Rate
    100%full out
    Q2 FY26
    Operating Rate
    above 90%
    Q2 FY26
    Operating Rate
    mid-80sclimbing back up
    Q2 FY26

    Related to VCM production, performing better and better from a low last year.

    PVC Pipe Legal Settlement Cash Payments
    $67 million
    Q2 FY26

    Recorded in Q1 FY26, paid in Q2 FY26.

    China PVC Export Volume
    300,000 tonnes per monthfrom a peak of 700,000 tonnes
    Post-March

    Surge in export before VAT drawback elimination in March, then fell back to more normal levels.

    Operating Rate
    around mid-70s
    Current

    Due to slower economy.

    Operating Rate
    below 60%
    Current

    Due to slower economy and very elevated naphtha prices, making it uneconomical to run.

    PVC Price
    $690getting back up again
    Current

    Higher than what it was after going way down.

    PVC Price
    $720getting back up again
    Current

    Higher than what it was after going way down.

    Data Center Spend Contribution to Pipe Demand
    up to 30%
    Current

    Anecdotal data from distributors; company cannot substantiate with own data.

    Industry KPIs

    2
    MetricValueDetails
    Volume vs price split—
    Productivity cost savings program$600 millionUSD

    Deals & partnerships

    2
    ACIPVC and VCM plant

    Closed in January. Performance has been pleasing.

    unnamedPVC and VCM plant

    Closed in June 2026. Facility benefits from advantageous logistical infrastructure, including a deepwater port capable of receiving globally advanced feedstocks supplied by North American operations. Acquired at a very low price.

    Capital programs

    1
    PVCO Plantunderway

    Benefit: support healthy sales volume growth in pipe and fittings

    New plant expected to start up at the end of 2026, contributing to favorable outlook for pipe and fittings demand.

    Risks & headwinds

    5
    Soft North American Residential ConstructionFY26

    HIP 2026 revenue and EBITDA margin guidance lowered to lower end of ranges ($4.4B-$4.6B revenue, 19%-21% EBITDA margin)

    Mitigation: HIP's diversified portfolio (infrastructure, housing products outperforming market), strong brands, broad geographic footprint.

    Inflation in Transportation and Raw Material CostsQ2 FY26 and ongoing into H2 FY26

    HIP EBITDA margin declined to 22% from 24% in Q2 FY25; contributed to lower HIP guidance

    Mitigation: Pricing actions in global compounds aimed at offsetting rising costs; 3-pillar profitability improvement plan (cost savings pillar).

    Pull-forward of Pipe OrdersQ3 FY26

    modest impact to our third quarter pipe sales volumes

    Mitigation: Customers sought to secure supply in wake of Middle East conflict onset; overall demand outlook for pipe and fittings remains favorable.

    Residual and Planned OutagesQ2 FY26

    plant reliability... was not yet where we wanted to be due to residual and planned outages this quarter

    Mitigation: Most production issues corrected by end of Q2, plants running well into July. Focus for remainder of 2026 is to sustain improved reliability. Part of 3-pillar profitability improvement plan.

    Global Oil Price MovementsH2 FY26

    future price trends [for PEM] to be heavily influenced by global oil price movements

    Mitigation: PEM's North American feedstock and energy cost advantage provides insulation from oil price spikes affecting higher-cost regions.

    What to watch in Q3 FY26

    5

    PEM Plant Reliability

    H2 FY26
    Currentimproved, but not yet where we wanted to be due to residual and planned outages in Q2
    Targetsustained improved reliability on a consistent month-to-month and quarter-to-quarter basis

    Why it matters

    Improved reliability is a key pillar of the profitability improvement plan, directly impacting EBITDA and operational efficiency.

    Our focus for PEM for the remainder of 2026 is to sustain this improved reliability on a consistent month-to-month and quarter-to-quarter basis.

    Q&A highlights

    5

    How sustainable are the higher PEM results, and how much of the $150M Q2 EBITDA benefit from the 3-pillar plan was specific to PEM? Are these savings sustainable?

    The vast majority of the 3-pillar plan's benefit goes to PEM, and these are sustainable cost savings, not one-offs. The $300 million in savings for H1 FY26 are visible in the P&L, specifically in the cost of sales line, which decreased by $150 million year-over-year despite a 3% volume increase.

    “Now none of these are one-offs. So these are sustainable cost savings going into the future. So we've added about $300 million to EBITDA, thanks to the savings so far this year and about $150 million in this quarter.”

    asked by Hassan Ahmed · answered by Jean-Marc Gilson

    2 min read6 chapters

    Detailed Narrative

    01

    PEM Segment Performance Drivers

    The Performance and Essential Materials (PEM) segment's strong Q2 FY26 performance was primarily driven by its globally advantaged feedstock and energy position in North America. Higher global oil prices increased costs for competitors in Asia and Europe, while PEM's production costs, based on more affordable North American natural gas and NGLs, remained stable or declined. This allowed PEM to convert higher global selling prices directly into higher margins and EBITDA, with average sales prices increasing 21% sequentially.

    02

    3-Pillar Profitability Improvement Plan Progress

    Westlake's 3-pillar profitability improvement plan, initiated last year, is generating significant cost savings, contributing $150 million to year-over-year EBITDA improvement in Q2 FY26 and $300 million year-to-date. The plan focuses on footprint optimization (including shutdowns of Epoxy, styrene, and chlorovinyl plants), company-wide cost savings, and plant reliability. The Epoxy business, for example, has returned to profitability from annual losses exceeding $100 million, and North American chlorovinyl operations are more streamlined.

    03

    HIP Segment Resilience and Growth

    The Housing and Infrastructure Products (HIP) segment achieved its second-highest quarterly revenue in history, reaching $1.3 billion, despite soft North American residential construction. This was driven by solid 6% organic sales volume growth, particularly in pipe and fittings, which saw a 20% year-over-year increase due to infrastructure investments and data center construction. The housing products business also outperformed the market, leveraging strong brands and a broad geographic footprint, demonstrating the value of HIP's diversified portfolio.

    04

    Strategic Acquisitions and Integration

    Westlake completed the acquisition of a PVC and VCM plant in Willmschen, Germany, in June 2026. This facility offers advantageous logistical infrastructure, including a deepwater port, enabling the company to optimize its European supply chain by leveraging North American feedstock. This acquisition is part of a broader strategy to maximize earnings for the alkali-vinyl business and is expected to contribute more meaningfully to PEM's earnings starting next year.

    05

    Balance Sheet Strength and Capital Allocation

    Westlake maintains a strong balance sheet with $1.9 billion in cash and investments and $5.1 billion in total debt as of June 30, 2026, upholding its investment-grade credit rating. The company retired $500 million of debt and repurchased $30 million of common stock in Q2 FY26. Management emphasizes a returns-based culture, balancing organic and inorganic growth opportunities with shareholder returns and a commitment to a strong capital structure.

    06

    CFO Transition

    The call marked the retirement of Steve Bender, who served as CFO for 21 years, and the introduction of Jon Baksht as the new Chief Financial Officer. Steve Bender was recognized for his contributions to Westlake's growth, financial strength, and achieving an investment-grade standing. Jon Baksht expressed excitement about joining the team and continuing to build on the company's positive momentum and focus on all stakeholders.

    AI-generated summary of the company’s earnings call. Not investment advice.