Westlake Chemical Partners(WLKP) - 2024 Q1 - Quarterly Results

First Quarter 2024 Results Announcement Westlake Chemical Partners announced Q1 2024 results, reporting stable net income but decreased operating cash flow, while management provided a constructive outlook and declared a consistent quarterly distribution Financial Performance Summary Westlake Chemical Partners reported stable net income at $14.8 million, but operating cash flow decreased to $104.6 million due to working capital changes, and MLP distributable cash flow slightly declined to $16.9 million Q1 2024 Key Financial Metrics Comparison | Financial Metric | Q1 2024 ($M) | Q1 2023 ($M) | Change (YoY) ($M) | Q4 2023 ($M) | Change (QoQ) ($M) | | :--- | :--- | :--- | :--- | :--- | :--- | | Net Income Attributable to Partnership | $14.8M | $14.9M | -$0.1M | $14.3M | +$0.5M | | Cash Flow from Operating Activities | $104.6M | $144.9M | -$40.3M | $107.7M | -$3.1M | | MLP Distributable Cash Flow | $16.9M | $17.6M | -$0.7M | $16.4M | +$0.5M | - The decrease in year-over-year cash flow from operating activities was primarily due to less favorable working capital changes[2] - The decrease in MLP distributable cash flow compared to the prior-year quarter was mainly due to lower production and sales volume[2] Management Commentary and Outlook Management credits stable performance to the ethylene supply agreement and improved third-party margins, maintaining a constructive outlook for 2024 due to stable demand and favorable cost trends - The stability of results is largely credited to the ethylene supply agreement with Westlake, where 95% of OpCo's production is sold to Westlake for a fixed cash margin of $0.10 per pound[4][5] - The company opportunistically increased third-party sales volume in Q1 2024 due to modestly improved ethylene margins from lower feedstock and energy costs[4] - The outlook for the rest of 2024 is constructive, with expectations of stable demand from downstream derivative products and continued support for third-party margin improvement[4] Distributions and Coverage The Partnership declared its 39th consecutive quarterly distribution of $0.4714 per unit, with a trailing twelve-month coverage ratio of 0.93x and a cumulative IPO coverage of 1.08x Quarterly Distribution and Coverage Ratio | Metric | Value | | :--- | :--- | | Quarterly Distribution per Unit | $0.4714 | | Consecutive Quarterly Distributions | 39 | | Trailing Twelve-Month Coverage Ratio | 0.93x | | Cumulative Coverage Ratio (since IPO) | 1.08x | Consolidated Financial Statements The consolidated financial statements for Q1 2024 show a decrease in net sales, stable net income, a slight decline in total assets and liabilities, and a significant drop in operating cash flow Consolidated Statements of Operations Total net sales decreased to $284.7 million in Q1 2024, primarily due to lower sales to Westlake, while net income attributable to the Partnership remained stable at $14.8 million Q1 2024 Statement of Operations Highlights (in thousands) | Account | Q1 2024 ($) | Q1 2023 ($) | | :--- | :--- | :--- | | Total net sales | $284,673 | $307,677 | | Gross profit | $102,180 | $106,073 | | Income from operations | $95,103 | $98,159 | | Net income attributable to Westlake Partners | $14,833 | $14,892 | | Net income per limited partner unit | $0.42 | $0.42 | Condensed Consolidated Balance Sheets Total assets slightly decreased to $1.295 billion as of March 31, 2024, with total liabilities also declining to $446.8 million, leading to a marginal decrease in total equity Balance Sheet Summary (in thousands) | Account | March 31, 2024 ($) | December 31, 2023 ($) | | :--- | :--- | :--- | | Total current assets | $224,348 | $226,203 | | Total assets | $1,295,076 | $1,316,842 | | Total liabilities | $446,831 | $460,592 | | Total equity | $848,245 | $856,250 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly decreased to $104.6 million in Q1 2024, with $97.7 million used in financing activities, leaving $55.8 million in cash at quarter-end Q1 2024 Cash Flow Summary (in thousands) | Account | Q1 2024 ($) | Q1 2023 ($) | | :--- | :--- | :--- | | Net cash provided by operating activities | $104,565 | $144,860 | | Net cash used for investing activities | ($9,773) | $228 | | Net cash used for financing activities | ($97,651) | ($105,282) | | Net increase (decrease) in cash | ($2,859) | $39,806 | | Cash and cash equivalents at end of period | $55,760 | $104,588 | Reconciliation of Non-GAAP Financial Measures This section provides reconciliations for non-GAAP financial measures, including MLP distributable cash flow and EBITDA, to their most directly comparable GAAP measures Reconciliation of MLP Distributable Cash Flow MLP distributable cash flow was $16.9 million in Q1 2024, reconciled from net income by adjusting for non-cash items and noncontrolling interest MLP Distributable Cash Flow Reconciliation (in thousands) | Description | Q1 2024 ($) | Q1 2023 ($) | Q4 2023 ($) | | :--- | :--- | :--- | :--- | | Net income | $89,646 | $91,452 | $87,057 | | Add: Depreciation, amortization, etc. | $28,265 | $27,003 | $28,796 | | Less: Maintenance capital expenditures | ($7,749) | ($8,024) | ($11,805) | | Less: Distributable cash flow attributable to noncontrolling interest | ($81,794) | ($85,574) | ($79,948) | | MLP distributable cash flow | $16,892 | $17,551 | $16,418 | Reconciliation of EBITDA EBITDA for Q1 2024 was $124.4 million, remaining stable compared to prior periods, calculated by adjusting net income for interest, taxes, depreciation, and amortization EBITDA Reconciliation (in thousands) | Description | Q1 2024 ($) | Q1 2023 ($) | Q4 2023 ($) | | :--- | :--- | :--- | :--- | | Net income | $89,646 | $91,452 | $87,057 | | Add: Interest expense—Westlake | $6,581 | $7,315 | $6,632 | | Add: Provision for income taxes | $210 | $212 | $206 | | Add: Depreciation and amortization | $27,994 | $26,636 | $28,301 | | EBITDA | $124,431 | $125,615 | $122,196 | Supplementary Information This section includes important disclaimers regarding forward-looking statements, the rationale for using non-GAAP financial measures, and details for the Q1 2024 earnings conference call Forward-Looking Statements and Risk Factors This section highlights that future performance statements are forward-looking and subject to various risks, including operational, economic, and market factors detailed in the Form 10-K - The release contains forward-looking statements concerning future coverage ratios, ethylene margins, and distributions[7] - Actual results could differ materially due to risks such as feedstock price volatility, economic conditions, operating difficulties, and actions of Westlake Corporation[7] Use of Non-GAAP Financial Measures The Partnership utilizes non-GAAP measures like MLP distributable cash flow and EBITDA to provide supplemental insights into business trends and performance, not as GAAP substitutes - The company uses non-GAAP measures such as MLP distributable cash flow and EBITDA to provide supplemental information on business trends and performance[9] - MLP distributable cash flow is defined as distributable cash flow less the portion attributable to Westlake's noncontrolling interest and incentive distribution rights[9] - EBITDA is defined as net income before interest expense, income taxes, depreciation, and amortization[9] Conference Call Information A conference call to discuss Q1 2024 results was scheduled for May 1, 2024, at 1:00 PM ET, with registration and webcast links provided - A conference call was scheduled for May 1, 2024, at 1:00 PM Eastern Time to discuss Q1 results[11] - Registration and webcast links were provided for access to the call[11][12]