Westlake Chemical Partners LP Q1 FY2025 earnings call

• The first quarter financial performance was impacted by the planned turnaround at Petro 1 ethylene unit in Lake Charles, LA, leading to lower production and sales volume and higher maintenance capex.
• The business model's stability is demonstrated via the fixed margin ethylene sales agreement, minimizing market volatility and production risk.
• 43 consecutive quarterly distributions since IPO in 2014 with no reductions. Distributions have grown 71% since original minimum.
• Petro 1 ethylene unit restarted on April 12 and is ramping up; no further planned turnarounds in 2025 or 2026.
• Strong balance sheet with conservative financial and leverage metrics.
• Evaluate growth levers including increasing ownership interest in OpCo, acquisitions of qualified income streams, organic growth via ethylene facility expansions, and negotiating higher fixed margin in ethylene sales agreement with Westlake.

Westlake Chemical Partners' first quarter 2025 net income was $5 million or $0.14 per unit. Consolidated net income including OpCo’s earnings was $42 million on consolidated net sales of $238 million. Distributable cash flow for the quarter was $5 million or $0.13 per unit. First quarter 2025 net income was $10 million below Q1 2024 due to lower production and sales volume from the Petro 1 turnaround. Distributable cash flow decreased by $12 million compared to Q1 2024 due to lower production/sales and higher maintenance capex from the Petro 1 turnaround. At quarter end, consolidated cash balance and investments totaled $154 million, long-term debt was $400 million, and OpCo spent $16 million on capex. The partnership maintained a strong leverage ratio of approximately 1x.

• Petro 1 ethylene unit began restart on April 12 and is ramping up to meet market demand.
• Global trade tensions create uncertainty, but the ethylene sales agreement provides predictable fee-based cash flow from Westlake for 95% of OpCo's production.
• Evaluate growth via four levers: increase ownership in OpCo, acquire qualified income streams, organic growth of ethylene facilities, and negotiate higher fixed margin in ethylene sales agreement with Westlake.

• Global trade tensions have intensified, creating heightened uncertainty for businesses and investors, which could lead to market volatility.

Q: It seems like the financial impact of the Q1 turnaround at Petro 1 was a little bit more significant on your quarterly earnings than previous turnarounds. Could you help us understand that? Was that just a function of the size of the turnaround? Or were there like any unplanned expenses that caused a bigger impact there?

A: Matthew, this is Steve. It really went really as we had planned in terms of the impact. We brought the unit down at the end of January. And so for the quarter, it was down for the months of February and March. And so we expect the unit to be down from a production perspective in those two months. And so the impact for the quarter really was reflective of what’s going on. I think you may be also factoring into the fact that we still are seeing elevated interest rates kind of weighing on the loan obligations that the company has. That’s probably the factor that you might be thinking about because realistically, the performance and its production over the course of the quarter was really as we had been expecting and frankly as we had internally budgeted.

Q: The valuation difference between the parent Westlake and the MLP Westlake LP seems to have compressed lately. Is there still enough of a valuation difference to justify keeping Westlake LP around?

A: Yes. It’s a good question. I think as you think about the parent, the C-Corp, it certainly has seen some compression in its valuations, which increases its multiple accordingly. But we tend to think about this, excuse me, over the business cycle rather than at any current period in time. And so as we think about this, the value proposition has continued to be there. As you know well, the markets have been challenged in terms of dropdown stories in the MLP space. But nevertheless, the valuation differential between the partnership where it trades and Westlake Corporation where it trades really over a reasonable cycle period of time remains pretty elevated.