Westlake Chemical Partners(WLKP) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Westlake Partners reported a net income of $13 million or $0.37 per unit for Q3 2023, a decrease of $2 million compared to Q3 2022 net income of $15 million [19] - Distributable cash flow for Q3 2023 was $14 million, down $3 million from $17 million in Q3 2022, attributed to higher maintenance capital expenditures [7][19] - Consolidated net income, including OpCo's earnings, was $81 million on consolidated net sales of $322 million [19] Business Line Data and Key Metrics Changes - The Building Products division saw a 7% increase in volumes quarter-over-quarter, driven by lower input costs, particularly PVC resin, which contributed to margin expansion [40] - The partnership maintained a strong leverage ratio of approximately 1x, with long-term debt at $400 million [8][11] Market Data and Key Metrics Changes - The company noted that rising mortgage rates are dampening demand in the Building Products segment, with current rates around 8% impacting potential homebuyers [30] - Seasonal effects are expected to persist into Q1, affecting construction demand [30] Company Strategy and Development Direction - The company is focused on long-term value and distributions to unitholders, with plans for organic growth through expansions of current ethylene facilities and potential acquisitions [11][12] - The next planned turnaround is at the Petro 1 ethylene unit in mid-2024, with further details to be provided post-planning [9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about demand fundamentals for ethylene, driven by steady domestic demand and export opportunities [33] - The company believes its fee-based cash flow structure will provide stability through economic fluctuations and planned/unplanned turnarounds [33] Other Important Information - The partnership announced a quarterly distribution of $0.4714 per unit for Q3 2023, marking the 37th consecutive quarterly distribution since its IPO in 2014 [20] - Cumulative distribution cash flow has been maintained at approximately 1x since the IPO [9] Q&A Session Summary Question: Impact of planned maintenance expenses and inflation - Management indicated that higher maintenance expenses are primarily a timing issue and do not pose a risk to cash generation or distributions [37] Question: Margin expansion in the housing segment - The margin expansion was attributed to lower input costs, particularly PVC, and improved volumes, despite challenges in maintaining prices [40]