Westlake(US:WLK)2025-08-06 21:01PART I. FINANCIAL INFORMATION Financial Statements The company reported a net loss of $131 million in Q2 2025, a significant downturn from $323 million net income in Q2 2024, driven by lower sales and restructuring costs Notes to Consolidated Financial Statements Notes detail financial statement preparation, accounting pronouncements, and key line items, including $123 million in Pernis facility closure costs and ongoing antitrust lawsuits - In June 2025, the company approved a plan to close all remaining operations at its Pernis, Netherlands facility, recognizing $123 million in related costs during the quarter, with additional charges of approximately $78 million expected in future periods7172 - The company is a defendant in multiple antitrust lawsuits concerning caustic soda, ethylene, and PVC pipe, alleging price-fixing and conspiracy, with the potential financial impact currently indeterminable808184 - The company may be subject to reasonably possible loss contingencies related to environmental matters in the range of $100 million to $170 million, in addition to amounts already reserved96 Segment Income (Loss) from Operations (in millions) | Segment | Q2 2025 | Q2 2024 | 6 Months 2025 | 6 Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Performance and Essential Materials | $(318) | $157 | $(481) | $179 | | Housing and Infrastructure Products | $222 | $266 | $370 | $476 | Consolidated Statement of Operations Highlights (3 & 6 Months Ended June 30) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | 6 Months 2025 (in millions) | 6 Months 2024 (in millions) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $2,953 | $3,207 | $5,799 | $6,182 | | Gross Profit | $258 | $664 | $490 | $1,130 | | Income (Loss) from Operations | $(109) | $406 | $(141) | $629 | | Net Income (Loss) | $(131) | $323 | $(166) | $508 | | Diluted EPS | $(1.11) | $2.40 | $(1.42) | $3.75 | Consolidated Balance Sheet Highlights | Metric | June 30, 2025 (in millions) | Dec 31, 2024 (in millions) | | :--- | :--- | :--- | | Total Current Assets | $5,946 | $6,214 | | Total Assets | $20,806 | $20,750 | | Total Current Liabilities | $2,403 | $2,219 | | Long-Term Debt, net | $4,654 | $4,556 | | Total Liabilities | $10,015 | $9,707 | | Total Equity | $10,791 | $11,043 | Consolidated Cash Flow Highlights (6 Months Ended June 30) | Metric | 2025 (in millions) | 2024 (in millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $58 | $406 | | Net Cash used for Investing Activities | $(726) | $(495) | | Net Cash used for Financing Activities | $(197) | $(146) | | Net Decrease in Cash | $(835) | $(261) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q2 2025 net loss of $142 million to lower sales, higher costs, and $115 million in restructuring charges, impacting segment operating incomes - The company's European and North American businesses have been negatively impacted by reduced demand and lower prices due to macroeconomic conditions, including the war in Ukraine, volatile energy prices, slower GDP growth, inflation, and higher interest rates since 2022110 - In Q2 2025, the company recognized restructuring charges of $115 million related to the closure of its Pernis, Netherlands facility and the temporary cessation of operations of a PVC resin unit in Suzhou, China135140 Key Financial Results Summary (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (in millions) | Q2 2024 (in millions) | Change (in millions) | | :--- | :--- | :--- | :--- | | Net Sales | $2,953 | $3,207 | $(254) | | Income (Loss) from Operations | $(109) | $406 | $(515) | | Net Income (Loss) Attributable to Westlake | $(142) | $313 | $(455) | | Diluted EPS | $(1.11) | $2.40 | $(3.51) | - Cash flow from operations decreased by $348 million to $58 million for the first six months of 2025, compared to $406 million in the same period of 2024, primarily due to lower earnings and cash used for a major plant turnaround161 Results of Operations Q2 2025 net sales decreased 8% to $2.95 billion, with gross profit margin compressing to 9% due to lower prices, volumes, and higher costs, impacting segment operating incomes Net Sales Percentage Change from Prior-Year Period (Q2 2025) | Segment | Average Sales Price | Volume | | :--- | :--- | :--- | | Performance and Essential Materials | -2% | -9% | | Housing and Infrastructure Products | -1% | -2% | | Company Average | -1% | -7% | - The Performance and Essential Materials segment's operating income decreased by $475 million YoY to a loss of $318 million in Q2 2025, driven by lower PVC and polyethylene sales prices, higher costs, plant outages, and $115 million in restructuring charges145 - The Housing and Infrastructure Products segment's operating income decreased by $44 million YoY to $222 million in Q2 2025, primarily due to lower sales prices for pipe and fittings and lower sales volumes for building products147 Liquidity and Capital Resources As of June 30, 2025, liquidity included $2.085 billion cash and $192 million securities, with $4.657 billion long-term debt and a fully available $1.5 billion credit facility - As of June 30, 2025, the company had cash and cash equivalents of $2,085 million and available-for-sale securities of $192 million168 - Total long-term debt carrying value was $4,657 million as of June 30, 2025, with the company in compliance with all debt covenants169177 - The company has a $1.5 billion revolving credit facility, which had no borrowings and full availability as of June 30, 202549178 - Under its stock repurchase program, the company repurchased $30 million of common stock in the first six months of 2025, with approximately $386 million remaining available for future repurchases as of June 30, 2025163202204 Quantitative and Qualitative Disclosures about Market Risk The company manages commodity price, interest rate, and foreign currency risks through feedstock flexibility, derivatives, and hedging for its $4.7 billion fixed-rate debt and €700 million senior notes - The company faces commodity price risk as many of its products and raw materials are commodities, mitigating this risk through strategies like feedstock flexibility and derivative instruments191 - As of June 30, 2025, the company had $4.72 billion in fixed-rate debt and $16 million in variable-rate debt, exposing it to interest rate risk upon refinancing or rate changes192 - To mitigate foreign currency risk, the company uses foreign exchange hedging contracts with a notional value of €150 million and has designated its €700 million senior notes as a net investment hedge for its euro-denominated subsidiaries194195 Controls and Procedures Management, including the CEO and CFO, concluded disclosure controls were effective as of June 30, 2025, with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures are effective as of the end of the period covered by the report196 - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls197 PART II. OTHER INFORMATION Legal Proceedings The company updates legal proceedings, including enforcement negotiations with the West Virginia DEP for its Natrium facility, with a potential penalty exceeding $1 million - The company is in enforcement negotiations with the West Virginia Department of Environmental Protection regarding alleged violations at its Natrium facility, with a potential penalty exceeding $1 million199 - For a comprehensive update on legal matters, including various antitrust and environmental cases, the report refers to Note 13 of the consolidated financial statements198 Risk Factors No new risk factors are disclosed in this report; investors are referred to the 2024 Form 10-K for a comprehensive discussion - The report directs investors to Item 1A, "Risk Factors" in the 2024 Form 10-K for a discussion of potential risks200 Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the stock program in Q2 2025; 780 shares were acquired for tax obligations, with $386 million remaining for future repurchases Common Stock Purchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid Per Share | Shares Purchased as Part of Program | Max. Value Remaining for Purchase | | :--- | :--- | :--- | :--- | :--- | | April 2025 | 400 | $92.64 | 0 | $386,178,956 | | May 2025 | 0 | N/A | 0 | $386,178,956 | | June 2025 | 380 | $75.78 | 0 | $386,178,956 | | Total | 780 | $84.42 | 0 | | - No shares were repurchased under the company's $500 million stock repurchase program expansion during the three months ended June 30, 2025204 Other Information No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2025203 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL data - The report includes required certifications from the CEO and CFO as exhibits205