PresentationGood morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation PEM Profitability Improvement Plan Update Conference Call. [Operator Instructions]. As a reminder, ladies and gentlemen, this conference is being recorded today, December 15, 2025. I would now like to turn the call over to today's host, Jeff Holy, Westlake's Vice President and Chief Accounting Officer. Sir, you may begin.Jeff HolyVP & Chief Accounting Officer Thank you, Daniel. Good morning, everyo ...

Summary of Westlake Corporation PEM Profitability Improvement Plan Update Conference Call Company Overview - **Company**: Westlake Corporation - **Segments**: Performance and Essential Materials (PEM), Housing and Infrastructure Products (HIP) Key Points and Arguments Profitability Challenges - PEM's earnings and margins have declined due to global overcapacity in materials, particularly in the chlorovinyl chain and styrene [5][10] - The overcapacity has led to downward pressure on sales prices, resulting in unprofitable conditions at higher-cost manufacturing sites [5][10] Actions Taken - Westlake announced the closure of several higher-cost chlorovinyl and styrene plants in North America, specifically: - VCM plant in Lake Charles North - Chlor-alkali plant in Lake Charles South - PVC facility in Aberdeen, Mississippi - Styrene plant in Lake Charles - These closures are part of the PEM Profitability Improvement Plan and are expected to reduce global chlorovinyl capacity by 11% to 15% [8][9] Financial Impacts - Expected annual EBITDA benefit of approximately $100 million starting in 2026 from these actions [6][10] - Additional cash savings of $75 million in 2026 from avoided capital spending and turnaround costs, leading to total free cash flow savings of approximately $175 million [6][10] - Total pre-tax charges related to the closures are estimated at $415 million, including non-cash charges and employee severance costs [9][10] Market Conditions - Global macroeconomic conditions remain challenging, with weak industrial and manufacturing demand impacting sales prices and margins [11] - Fourth quarter EBITDA for PEM is expected to be $125 million to $150 million lower than the third quarter of 2025 [11][43] Future Outlook - The optimization actions are expected to position Westlake as a leading global chlorovinyl producer with a better cost structure [12][60] - The company anticipates that the manufacturing footprint optimization will contribute a total of $600 million in EBITDA improvement starting in 2026 [10][12] Strategic Focus - The focus of the closures is on improving cost positions rather than directly addressing supply-side issues [25][76] - The company plans to continue servicing export markets with better-positioned assets, aiming for improved profitability [76] Additional Important Information - The decision to close plants was made after extensive analysis, emphasizing the need for a path to improve EBITDA and return on investment [12][60] - The company has not ruled out the possibility of restarting the closed plants if market conditions improve in the future [73][76] - The impact of these closures on the overall PVC, caustic, and chlorine markets is still uncertain, but the company aims to operate at a lower cost position moving forward [24][25][76]

Footprint Optimization - The company is shutting down three North American chlorovinyl plants and exiting the styrene business due to unfavorable market conditions and high costs[2, 5] - These closures are expected to improve annual EBITDA by approximately $100 million and generate free cash flow savings of around $175 million in 2026[2, 9] - The company anticipates one-time charges of about $415 million in 4Q'25, including a $357 million non-cash accelerated depreciation, amortization, and asset write-off charge[9] - The shutdown includes the following capacity reductions: 825 million lbs of Chlorine (11% of WLK global capacity), 910 million lbs of VCM (11% of WLK global capacity), 1,000 million lbs of PVC (15% of WLK global capacity), and 570 million lbs of Styrene (100% of WLK global capacity)[5] Profitability Improvement Plan - The company's Profitability Improvement Plan aims to restore PEM's Return on Investment to an appropriate level[4] - The plan is expected to generate approximately $600 million per year of EBITDA uplift starting in 2026, with each of the three pillars contributing around $200 million[9, 10, 12] - The footprint optimization efforts, including North American chlorovinyls and styrene closures, are projected to contribute $100 million to the $200 million total from Footprint Optimization[10] - The plan has an expected payback period of less than one year on the $58 million cash costs required for execution[2, 9]