Westlake Chemical Partners(US:WLKP)2019-08-10 16:24Financial Data and Key Metrics Changes - Consolidated net income for Q2 2019 was reported at $80 million, with Westlake Partners' net income at $14 million, reflecting a $1 million increase from Q2 2018 [11][16] - MLP distributable cash flow for Q2 2019 was $16 million, unchanged from Q2 2018, but decreased by $2 million from Q1 2019 [17][18] - The Partnership's net income decreased by $1 million from Q1 2019, primarily due to one-time costs and higher interest expenses [18][19] Business Line Data and Key Metrics Changes - The increase in net income was attributed to a 4.5% increase in ownership interest in OpCo, which was effective from January 1, 2019 [21] - The long-term ethylene sales agreement with Westlake Chemical provides stable fee-based cash flow, covering 95% of ethylene sales, which protects cash flows from margin volatility [22] Market Data and Key Metrics Changes - The Partnership's cash at the end of Q2 was $17 million, with an additional $141 million invested with Westlake Chemical [23] - Long-term debt at the end of Q2 was $400 million, with $377 million at the Partnership and $23 million at OpCo [24] Company Strategy and Development Direction - The company aims to grow cash flows through acquisitions and margin expansion, maintaining a path toward long-term distribution growth [13] - The focus remains on delivering long-term value to unitholders, leveraging stable cash flows from the ethylene sales agreement and exploring organic expansions and acquisitions [30][31] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges in the MLP market but emphasized the Partnership's ability to deliver growth through various levers [30][56] - The market's perception of Westlake Partners may not fully reflect its unique business model and guaranteed income streams [41][56] Other Important Information - The company declared a quarterly distribution of $0.4579 per unit, marking the 18th consecutive increase in distributions [14][25] - The next turnaround at the Petro 2 facility is scheduled for 2020, with further details to be provided as planning is completed [23] Q&A Session Summary Question: Distribution growth runway and future transactions - Management indicated that they have the capability to grow distributions through various levers, including drop-downs and acquisitions, and will pursue opportunities as long as fair valuations are available [39] Question: Investor perception and unit price performance - Management noted that the market may not fully recognize the Partnership's strengths and is working to distinguish itself from other MLPs [41][56] Question: Coverage ratio and distribution growth - Management expects to improve the coverage ratio through the timing of expenditures and remains confident in their ability to grow distributions [47] Question: Ethane purchasing strategy - The Partnership is primarily protected from ethane price fluctuations due to its sales agreement, but it will take opportunities to optimize margins on small merchant sales [50] Question: Acquisition timing and structure - Westlake Chemical has three years to decide on increasing its ownership in the Lotte JV, and the Partnership is open to acquiring a portion of that interest based on valuation [64][66]