Westlake Chemical (NYSE:) Companions (NYSE: WLKP) reported a profitable third quarter for 2024, with a internet earnings of $18 million, or $0.51 per unit, showcasing an enchancment from the earlier yr’s quarter. The corporate skilled enhanced gross sales and earnings pushed by greater third-party ethylene gross sales costs and margins.
The choice to defer a deliberate turnaround on the Petro 1 ethylene unit till Q1 2025 and alter third-party gross sales quantity resulted within the highest quarterly distributable money stream since 2022 for Westlake Chemical Companions.
Key Takeaways
- Westlake Chemical Companions reported Q3 2024 internet earnings of $18 million, or $0.51 per unit.
- The corporate noticed a rise in third-party ethylene gross sales costs and margins.
- A deliberate turnaround on the Petro 1 ethylene unit was deferred to Q1 2025.
- The partnership’s distributable money stream for the quarter was $18 million.
- Quarterly distribution elevated by 71% for the reason that IPO in 2014, with 41 consecutive distributions.
Firm Outlook
- The partnership expects to keep up stability by its fastened margin ethylene gross sales settlement.
- No deliberate turnarounds for the rest of 2024 following the deferral of the Petro 1 unit’s turnaround.
- The Petro 1 turnaround is scheduled to start on the finish of January 2025 and final roughly 55 days.
Bearish Highlights
- Third-party ethylene gross sales costs and margins have decreased in This autumn from the elevated ranges in Q3.
- The worldwide macroeconomic setting stays unpredictable.
Bullish Highlights
- Westlake Companions’ enterprise mannequin minimizes market volatility and manufacturing threat.
- The partnership has grown its quarterly distribution considerably since its IPO.
- The ethylene gross sales settlement ensures secure and predictable money flows.
Misses
- Regardless of a robust Q3, there’s little third-party gross sales quantity deliberate for the remainder of 2024.
- The affect of decrease margins in This autumn on the outcomes is anticipated to be minimal because of the strategic gross sales quantity shift.
Q&A Highlights
- The shift of third-party gross sales quantity into Q3 was a strategic transfer to maximise margins.
- There may be little or no third-party gross sales quantity left for This autumn, thus a low-impact from the decrease margins.
- The partnership is open to assessing market curiosity and the potential for distribution progress and asset drop.
In abstract, Westlake Chemical Companions delivered a sturdy efficiency within the third quarter of 2024, attributing success to strategic choices that capitalized on favorable market situations. The corporate’s resolution to defer upkeep actions and optimize gross sales timing has resulted in a big enhance in distributable money stream.
Trying forward, Westlake Chemical Companions stays cautious however optimistic, because it continues to navigate the challenges posed by the unpredictable macroeconomic local weather whereas sustaining a concentrate on protected operations and environmental stewardship.
InvestingPro Insights
Westlake Chemical Companions’ sturdy Q3 2024 efficiency is additional illuminated by knowledge from InvestingPro. The corporate’s market capitalization stands at $796.56 million, reflecting its stable place within the chemical trade. With a P/E ratio of 12.83, WLKP seems to be moderately valued in comparison with its earnings, which aligns with the reported internet earnings of $18 million for the quarter.
InvestingPro Suggestions spotlight that WLKP “pays a big dividend to shareholders,” which is in line with the corporate’s report of accelerating its quarterly distribution by 71% since its IPO in 2014. That is additional supported by the spectacular dividend yield of 8.4%, making it a beautiful choice for income-focused buyers.
One other related InvestingPro Tip signifies that WLKP’s “money flows can sufficiently cowl curiosity funds,” which underscores the corporate’s monetary stability and skill to keep up its distribution coverage. That is significantly essential given the partnership’s concentrate on offering secure and predictable money flows by its fastened margin ethylene gross sales settlement.
The corporate’s profitability is bolstered by an InvestingPro Tip stating that WLKP has been “worthwhile over the past twelve months,” with a robust EBITDA of $503.96 million for the final twelve months as of Q3 2024. This profitability, mixed with the corporate’s strategic choices to defer turnarounds and optimize gross sales timing, helps its capability to generate constant returns for unitholders.
For buyers in search of extra complete evaluation, InvestingPro presents further ideas and insights that might present a deeper understanding of Westlake Chemical Companions’ monetary well being and market place. There are 10 further ideas out there on InvestingPro, which could possibly be priceless for these trying to make knowledgeable funding choices within the chemical sector.
Full transcript – Westlake Chemical Companions LP (NYSE:) Q3 2024:
Operator: Good afternoon. Thanks for standing by. Welcome to the Westlake Chemical Companions’ Third Quarter 2024 Earnings Convention Name. In the course of the presentation, all members will probably be in a listen-only mode. After the audio system’ remarks, you can be invited to take part in a question-and-answer session. As a reminder, this convention is being recorded right now, November fifth, 2024. I might now like to show the decision over to right now’s host, John Zoeller, Westlake Chemical Companions Vice President and Treasurer. Sir, it’s possible you’ll start.
John Zoeller: Thanks. Good afternoon everybody and welcome to the Westlake Chemical Companions’ third quarter 2024 convention name. I’m joined right now by Albert Chao, our Government Chairman; Jean-Marc Gilson, our President and CEO; Steve Bender, our Government Vice President and Chief Monetary Officer, and different members of our administration staff. Throughout this name, we confer with Westlake Companions, or the Partnership. References to Westlake confer with our father or mother firm, Westlake Company, and references to OpCo confer with Westlake Chemical OpCo LP, a subsidiary of Westlake and the partnership which owns sure olefins property. Moreover, after we confer with distributable money stream, we’re referring to Westlake Chemical Companions MLP distributable money stream. Definitions of those phrases can be found on the Partnership’s web site. Right this moment, administration goes to debate sure subjects that can comprise forward-looking info that’s primarily based on administration’s beliefs, in addition to assumptions made by and knowledge at present out there to administration. These forward-looking statements recommend predictions or expectations and thus are topic to dangers or uncertainties. We encourage you to be taught extra in regards to the elements that might lead our precise outcomes to vary by reviewing the cautionary statements in our filings, that are additionally out there on our Investor Relations web site. This morning, Westlake Companions issued a press launch with particulars of our third quarter 2024 monetary and working outcomes. This doc is out there within the press launch part of our webpage at wlkpartners.com. A replay of right now’s name will probably be out there starting two hours after the conclusion of this name. The replay may be accessed by way of the Partnership web site. Please word that info reported on this name speaks solely as of right now, November fifth, 2024. And due to this fact you’re suggested that time-sensitive info could not be correct as of the time of any replay. I might lastly advise you that this convention name is being broadcast reside by an web webcast system that may be accessed on our webpage at wlkpartners.com. Now, I might like to show the decision over to Jean-Marc Gilson. Jean-Marc?
Jean-Marc Gilson: Thanks, John. Good afternoon everybody and thanks for becoming a member of us to debate our third quarter 2024 outcomes. On this morning’s press launch, we reported Westlake Companions’ third quarter 2024 internet earnings of $18 million or $0.51 per unit. In comparison with the third quarter of 2023, our third quarter of 2024 gross sales and earnings benefited from greater third-party ethylene gross sales value and margins. In an effort to raised seize these enticing third-party margins, we opportunistically make the choice to defer the deliberate turnaround at our Petro 1 ethylene unit to the primary quarter of 2025, whereas additionally shifting third-party gross sales quantity deliberate for later within the yr, into the third quarter. Because of this, through the third quarter, we have been capable of generate our highest quarterly distributable money stream since 2022, whereas additionally including to our working surplus. In the course of the third quarter, we celebrated our tenth yr as a publicly traded grasp restricted partnership. Since our IPO in 2014, we’ve grown our quarterly distribution by 71% from the partnership’s authentic minimal quarterly distribution of $0.275 per unit. Over that point interval, we made 41 consecutive distributions with none deductions. The soundness of Westlake Companions enterprise mannequin is enabled by our fastened margin ethylene gross sales settlement, which minimizes market volatility and different manufacturing threat. The excessive diploma of money stream stability, paired with the predictability of our enterprise, has enabled us to ship an extended historical past of dependable distributions. I might now like to show over the decision to Steve, who will present extra element on the monetary and working outcomes for the quarter. Steve?
Steve Bender: Thanks, Jean-Marc, and good afternoon, everybody. On this morning’s press launch, we reported Westlake Companions’ third quarter 2024 internet earnings of $18 million or $0.51 per unit. Consolidated internet earnings, together with OpCo’s earnings, was $104 million on consolidated internet gross sales of $277 million. The partnership had distributable money stream for the quarter of $18 million or $0.51 per unit. The third quarter 2024 internet earnings for Westlake Companions of $18 million was $5 million greater than the third quarter 2023 partnership internet earnings in comparison with the third quarter of 2023, the partnership benefited from OpCo’s greater manufacturing and gross sales volumes, greater third-party ethylene gross sales costs and margins and better third-party ethylene gross sales volumes. Distributable money stream of $18 million for the third quarter of 2024 elevated by $4 million in comparison with the third quarter of 2023, due primarily to greater third-party gross sales volumes, gross sales value and margins. Turning your consideration to the stability sheet and money flows. On the finish of the third quarter, we had consolidated money stability and money investments with Westlake by our funding administration settlement, totaling $170 million. Lengthy-term debt on the finish of the quarter was $400 million, of which $377 million was on the Partnership and the remaining $23 million was at OpCo. Within the third quarter of 2024, OpCo spent $16 million on capital expenditures. We maintained our sturdy leverage metrics with a consolidated leverage ratio beneath one occasions. On October 30, 2024, we introduced a quarterly distribution of $0.4714 per unit with respect to the third quarter of 2024. The partnership’s third quarter distribution will probably be paid on November 27, 2024, to unitholders of file November 12, 2024. For modeling functions, we’ve no deliberate turnarounds for the rest of 2024, following our resolution to defer the turnaround at our Petro 1 ethylene unit in Lake Charles, Louisiana till the primary quarter of 2025. We at present anticipate this turnaround to start on the finish of January 2025 and for it to final roughly 55 days. Now I might like to show the decision again over to Jean-Marc to make some closing feedback. Jean-Marc?
Jean-Marc Gilson: Thanks, Steve. We’re happy with the partnership monetary and operational efficiency within the third quarter. In the course of the quarter, third-party ethylene gross sales costs and margins improved to the very best quarterly common in years, partially attributable to climate occasions and manufacturing outages at different producers. In response, we opportunistically shifted the timing of our Petro 1 turnaround and our third-party gross sales quantity to learn from the improved pricing and margins. To this point, within the fourth quarter, third-party ethylene gross sales costs and margins have decreased from the elevated ranges within the third quarter. Nevertheless, we’ve comparatively little third-party gross sales quantity deliberate for the remainder of 2024. Whereas the general international macroeconomic setting stays unpredictable, our ethylene gross sales settlement, which offers a predictable fee-based money stream construction from our take-or-pay contract with Westlake for 95% of OpCo’s manufacturing, we’ll proceed to ship secure and predictable money flows by financial ups and downs in addition to deliberate and unplanned turnarounds. As at all times, we are going to proceed to concentrate on protected operations, together with being good stewards of the setting the place we work and reside as a part of our broader sustainability efforts. Thanks very a lot for listening to our third quarter earnings name. Now I’ll flip the decision again over to John.
John Zoeller: Thanks, Jean-Marc. Earlier than we start taking questions, I might prefer to remind you {that a} replay of this teleconference will probably be out there two hours after the decision has ended. We are going to present directions to entry the replay on the finish of the decision. Shivan, we’ll now take questions.
Operator: Thanks. At the moment, we are going to conduct the question-and-answer session. [Operator Instructions] Our first query comes from the road of Matthew Blair from TPH. Your line is now open.
Matthew Blair: Thanks and good afternoon, Jean-Marc and Steve.
Jean-Marc Gilson: Good afternoon, Matthew.
Matthew Blair: Good afternoon. I need to contact on the ready feedback that talked about that you simply shifted some third-party gross sales volumes into the third quarter. Is it doable to present us a way of simply how vital this was? After which for the fourth quarter, ought to we anticipate an affect, each from the decrease ethylene cracking margins in addition to from these diminished spot volumes?
Steve Bender: Sure. So Matthew, the shift to promoting extra of the remaining quantity we promote in out there the third quarter after we noticed a transfer up in margins was strategic to attempt to actually maximize what we had left to promote into the market. As you recall, we promote 5% over the course of the yr into third-party markets. And so the vast majority of what we have to promote in 2024 has now been bought. So there’s little or no left within the fourth quarter. And so though margins have declined within the fourth quarter relative to these within the third, we’ve little or no left to be bought within the fourth quarter. In order that decrease margin may have nil impact actually in our leads to This autumn.
Matthew Blair: Okay. Sounds good. After which as we glance into 2025, are you sensing any kind of elevated curiosity in MLP equities? What would you place the prospect of that for restarting distribution progress and restarting an asset drop?
Steve Bender: Sure. And so we proceed to evaluate actually the markets and proceed to have a robust curiosity in understanding urge for food for curiosity and we’ll think about and take a look at all choices. We acknowledge that the market has modified considerably within the 10-year interval since our IPO, and we’ll proceed to evaluate all choices. We’ve seen that others have began their distribution progress, and that is predicated on our capability to search out enticing buyers to come back into the unit at an accretive value. So we’ll proceed to have an excellent dialogue with buyers, and see if we are able to discover alternatives that make that transactable, however we’ll look and proceed to pursue all choices which might be on the market and out there to us.
Matthew Blair: Nice. Thanks.
Matthew Blair: You’re welcome.
Operator: I am exhibiting no additional questions right now. I might now like to show the decision again over to John Zoeller for any closing remarks.
John Zoeller: Thanks once more for collaborating in right now’s name. We hope you’ll be part of us for our subsequent convention name to debate our fourth quarter 2024 outcomes.
Operator: Thanks to your participation in right now’s convention. This does conclude this system. It’s possible you’ll now disconnect.
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