Westlake Corporation (WLK) Q4 2023 Earnings Call Transcript

Westlake Corporation (NYSE:WLK) Q4 2023 Earnings Call Transcript February 20, 2024 11:00 AM ET

Company Participants

Jeff Holy – VP & Treasurer

Albert Chao – President and CEO

Steve Bender – EVP and CFO

Conference Call Participants

Patrick Cunningham – Citi

Frank Mitsch – Fermium Research

Duffy Fischer – Goldman Sachs

Salvator Tiano – Bank of America

Mike Leithead – Barclays

Arun Viswanathan – RBC Capital Markets

Josh Spector – UBS

Matthew Blair – TPH

Jeff Zekauskas – JPMorgan

Turner Hinrichs – Morgan Stanley

Kevin McCarthy – Vertical Research Partners

David Begleiter – Deutsche Bank

Hassan Ahmed – Alembic Global Advisors

Operator

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation Fourth Quarter and Full Year 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. After the speaker’s remarks, you will be invited to participate in a question-and-answer session. As a reminder, ladies and gentlemen, this conference is being recorded today, February 20, 2024. I would now like to turn the call over to today’s host, Jeff Holy, Westlake’s Vice President and Treasurer. Sir, you may begin.

Jeff Holy

Thank you, Jonathan. Good morning, everyone, and welcome to the Westlake Corporation conference call to discuss our fourth quarter and full year results for 2023. I’m joined today by Albert Chao, our President and CEO, Steve Bender, our Executive Vice President and Chief Financial Officer, and other members of our management team.

During the call, we will refer to our two reporting segments, Performance and Essential Materials, which we refer to as PEM or Materials, and Housing and Infrastructure Products, which we refer to as HIP or Products. Today’s conference call will begin with Albert, who will open with a few comments regarding Westlake’s performance. Steve will then discuss our financial and operating results, after which, Albert will add a few concluding comments, and we’ll open the call to questions.

During the fourth quarter of 2023, we recorded a noncash impairment charge of $475 million related to the company’s epoxy business, as well as a $150 million charge to fully resolve certain liability claims that are currently not being covered by certain of our excess insurance carriers. We refer to these two charges as identified items in our earnings release and on this conference call. References to income from operations, EBITDA, net income and earnings per share on this call exclude the financial impact of the identified items. As such, comments made on this call will be in regard to our underlying business results using these non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to GAAP financial measures is provided in our earnings release, which is available in the Investor Relations section of our website.

Today, management is going to discuss certain topics that will contain forward-looking information that is based on management’s beliefs as well as assumptions made by and information currently available to management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. These risks and uncertainties are discussed in Westlake’s Form 10-K for the year ended December 31, 2022, and other SEC filings. We encourage you to learn more about these factors that could lead our actual results to differ by reviewing these SEC filings, which are also available on our Investor Relations website. This morning, Westlake issued a press release with details of our fourth quarter and full year results. This document is available in the Press Release section of our website at westlake.com. We have also included an earnings presentation, which can be found in the Investor Relations section on our website. A replay of today’s call will be available beginning today, two hours following the conclusion of this call. This replay may be accessed via Westlake’s website. Please note that information reported on this call speaks only as of today, February 20, 2024, and therefore, you’re advised that time-sensitive information may no longer be accurate as of the time of any replay. Finally, I would advise you that this conference call is being broadcast live through an Internet webcast system that can be accessed on our web page at westlake.com.

Now I would like to turn the call over to Albert Chao. Albert?

Albert Chao

Thank you, Jeff. Good morning, everyone. We appreciate you joining us to discuss our fourth quarter and full year 2023 results. Excluding the identified items, for the fourth quarter of 2023, we reported net income of $93 million or $0.72 per share, and EBITDA of $390 million on sales of $2.8 billion. While overall sales revenue was below the year-ago period due to lower average sales prices in the PEM segment, we are pleased that our fourth quarter total sales volume increased 7% compared to the fourth quarter of 2022, with North American demand strength partly offset by lower sales volumes in our international operations.

Regionally, our volume and price declines 2023 were most impacted in our European operations, which were pressured by a weak macroeconomic backdrop and imports into Europe from Asia. The volume and price declines were most felt in our base epoxy business, driven by the very weak economic environment in Europe and China, along with significant new global epoxy capacity additions. These capacity additions, which were primarily in China, were met with weak regional demand, driving a significant increase in Asian exports, Europe and other regions. These Asian export volumes were aggressively priced as some Asian competitors received energy subsidies to stimulate exports, at a time when European energy costs were still relatively high in part due to the ongoing war in Ukraine.

As a result of these factors, our European base epoxy resin business experienced a sharp and sudden decline in profitability. To reflect these market changes, along with our current outlook for global operating rates to remain under pressure, we recorded a noncash impairment charge in our base epoxy business in the Netherlands in the fourth quarter. We have begun to implement actions to reduce our costs and improve the profitability of our European businesses. The cost savings we’re expecting across our company-wide cost reduction programs are $125 million to $150 million in 2024, after achieving 2023 cost savings of $110 million.

Before turning the call over to Steve to review our financial results in more detail, I want to take a few minutes to review our accomplishments in 2023. Our HIP segment achieved record income from operations of $710 million, and a record EBITDA margin of 23% as we further integrated and achieved synergies from the Boral, Lasco and Dimex acquisitions. We are very pleased with the evolution of this segment, which produced back-to-back record results over the past two years, even with the economic challenges in the residential building market. These record results provide stability to our overall earnings in 2023 with an asset-light, cash-generative business model, with leading positions in North America.

Our constant focus on cash flow generation enabled Westlake to generate $2.3 billion of cash from operations, and $1.3 billion of free cash flow after investing over $1 billion to maintain and improve our plants and equipment. The solid cash flow generation, strengths of our business and confidence in the company’s future allowed us to return approximately $250 million to shareholders in 2023, including the increase of our quarterly dividend by 40% to $0.50 per share, which demonstrates our commitment to rewarding shareholders. We finished the year with a solid investment-grade rated balance sheet, highlighted by $3.3 billion of cash and equivalents, providing flexibility to pursue opportunities as they present themselves.

Finally, in conjunction with the publication of our 6th annual sustainability report in October, we added five additional feasibility goals to our existing CO2 emissions intensity reduction target. These five new goals address water usage, health and safety, community engagement, diversity and inclusion and the circular economy, and are an important part of our overall approach towards stewardship of our environment and communities. Taken together, I’m very proud of our 2023 accomplishments given the challenging global economic environment. And I’d like to thank our nearly 16,000 team members for their hard work and dedication that enabled these achievements and a record HIP results.

I would now like to turn the call over to Steve to provide more detail on our financial results for the fourth quarter and full year of 2023.

Steve Bender

Thank you, Albert, and good morning, everyone. As Albert discussed, our fourth quarter of 2023 financial results were reduced by $475 million as we fully impaired the base epoxy resin business in the Netherlands to reflect a change in the fair value of these assets as a result of the rapid deterioration in global epoxy markets over the past year. Asian and European economies remained weak throughout 2023, and we saw a flood of Asian epoxy imports into European markets as large Asian epoxy capacity additions were completed at a time of persistently elevated power, energy and raw material costs in our European operations.

Separately, as we previously disclosed, we reached settlements to resolve certain liability claims. We recognized a charge of $150 million in the fourth quarter of 2023 to reflect the portion of the total settlement amount that is subject to dispute with some of our insurance carriers. We’re pleased to have fully resolved these liability claims while we work with our insurers to resolve the disputed portion of the settlement amount.

As a reminder, my comments regarding income from operations, EBITDA, net income and earnings per share all exclude the financial impact of both the noncash impairment and the litigation settlement charges. Westlake reported net income of $93 million or $0.72 per share in the fourth quarter on sales of $2.8 billion. Net income for the fourth quarter of 2023 decreased $139 million from the fourth quarter of 2022 as a result of lower average sales prices and margins in PEM, particularly for caustic soda and epoxy resin and $20 million of restructuring cost as we optimized operations in our HIP segment. When compared to the third quarter of 2023, net income decreased by $190 million in the fourth quarter due to lower average sales prices in PEM, unfavorable sales mix changes in PEM, and a typical seasonal decline in HIP sales volume. For the fourth quarter of 2023, our utilization of the FIFO method of accounting resulted in an unfavorable pretax impact of $35 million compared to what earnings would have been reported on the LIFO method. This is only an estimate and has not been audited.

For the full year of 2023, we reported net income of $1.1 billion, and EBITDA of $2.6 billion on sales of $12.5 billion. Compared to our record 2022 results, net income attributable to Westlake declined by $1.1 billion as growth in HIP’s income from operations more than offset by lower PEM earnings, primarily due to lower average sales prices and margins.

Turning to our segment results. PEM EBITDA of $1.6 billion in 2023 was below our record 2022 results, primarily due to lower global sales prices and margins as a result of softer demand created by weaker global economic conditions and customer destocking at a time when new global capacity additions for polyethylene and epoxy resin entered the market. However, after customer destocking ended as 2023 drew to a close, we saw signs of improvement in our sales volumes, which rose 6% year-over-year in the fourth quarter, with improving signals and demand strength that have carried into the first quarter of 2024 from many of our PEM product categories.

On a quarterly basis, PEM’s fourth quarter EBITDA of $201 million decreased by $138 million from the third quarter. The sequential decline in EBITDA was the result of lower average sales prices particularly for caustic soda, which were driven by increased export demand and price changes that occurred from the third quarter. With the lower sales prices, we saw an increase in demand led by caustic soda that drove a 4% sequential increase in our sales volume in contrast to the historic pattern of slower customer orders and sales into year-end. While it’s still early in 2024, we have recently seen signs of firming demand after sales prices for most of our major PEM products were relatively stable on a month-to-month basis within the fourth quarter.

Moving to our HIP segment. $710 million of income from operations set a new annual record in 2023 despite lower revenue as the strong value of our brands allowed us to remain disciplined in pricing despite lower materials costs contributing to an improvement in EBITDA margin to 23% from 20% in 2022. These results are a testament to the strength of our brand and the importance of our products to our customers. The strong performance in 2023 illustrates the benefits of our vertical integration and diversification strategy as lower cost materials used by our HIP segment drove solid margins at a time when PEM segment margins were compressed due to lower sales prices.

Shifting focus to the fourth quarter results, HIP sales rose year-over-year as our penetration in the markets drove an 11% increase in sales volumes that more than offset lower average sales prices. Volume growth was strongest in our pipe and fittings business, particularly for residential and infrastructure pipe with strong customer orders late in the quarter and continuing into early 2024. While average sales prices declined 10% year-over-year, this is generally less pronounced than the declines in our materials cost, contributing to the expansion of HIP’s EBITDA margin to 18% from 14%, inclusive of the $20 million restructuring cost in the fourth quarter of ’23 to optimize our manufacturing footprint. Margin improvement was also supported by the 11% year-over-year sales volume growth and the achievement of over $20 million of additional cost synergies in 2023 on the Boral, Lasco and Dimex acquisitions.

Turning to the balance sheet and cash flows. Westlake’s cash generation reflects our continued focus on operational and financial discipline. For the full year of 2023, net cash provided by operating activities was $2.3 billion, while capital expenditures were $1 billion, resulting in strong free cash flow of $1.3 billion. As of December 31, 2023, cash and cash equivalents were $3.3 billion, and total debt was $4.9 billion, with our net leverage remaining below 1 turn of EBITDA. Westlake’s debt is at an attractive average fixed rate of 3.2%, and an average maturity of 16 years, which combined with $3 billion in cash and investment-grade rated balance sheet puts Westlake in a financially strong position at this stage of the business cycle. We will look to strategically deploy our balance sheet for value-creating opportunities.

Turning our attention to 2024, let me address some of your modeling questions and provide some guidance for the year ahead. Based on our current view of demand and prices, we expect 2024 revenue in our Housing and Infrastructure Products segment to be between $4 billion and $4.4 billion, with EBITDA margin around 20%. As Albert mentioned, we are targeting $125 million to $150 million of cost savings in 2024, even after our 2023 cost savings of $110 million exceeding last year’s target. We expect our total capital expenditures to be approximately $1 billion, similar to our depreciation run rate. This includes cost for a planned turnaround at our Petro 1 ethylene unit scheduled to begin in the second half of the year that is projected to last approximately 60 days. For the full year of 2024, we expect our effective tax rate to be approximately 23%. We also expect cash interest expense to be approximately $160 million.

Now I’d like to turn the call over to Albert to provide some current outlook of our business. Albert?

Albert Chao

Thank you, Steve. As we head into 2024, we are well positioned to respond to evolving market trends while executing our strategies. In our HIP segment, the breadth of North American footprint and our leading market positions with a broad product portfolio, supported by strong brands, has increased our penetration with the fastest growing segments of the market. Our exposure to this growing portion of the market should support future HIP segment sales volume growth. Meanwhile, in our PEM segment, we are also a market leader in specialty polyethylene and chlorovinyls, which provides Westlake scale and capabilities to serve our customers’ needs and support their growth plans.

Furthermore, our globally advantaged energy and feedstock position in North America provides our PEM segment with the flexibility of export sales opportunities. A key component of our business strategy is to reduce volatility in earnings and cash flow while maximizing earnings growth potential. The integration of our PEM and HIP segments demonstrates the strength of our strategy to capture the value of the cycle whether it moves more to the upstream or downstream portion of the value chain. In 2024, we will continue to deliver on all of our priorities including the safe, reliable operational plans, allocating capital to expand our business portfolio, generating value-added returns and providing top-tier shareholder returns while maintaining a strong investment-grade rated balance sheet. At the same time, we will continue to provide our customers with innovative products that provides a path to achieving their long-term sustainability goals.

Sustainability remains critical to our global strategy, not only because it’s the right thing to do for the environment, but also because it provides increasingly profitable market growth opportunities. We continue to look for ways to further integrate our businesses to capture this market growth. As a recent example, our global compounds and Dimex businesses have paired their respective expertise in PVC compounding and recycling to process the Westlake global compounds waste materials, including grinding, shredding, blending and compounding, utilizing Dimex’s processing services.

As 2024 progresses, we will continue to look for more opportunities to leverage the diverse materials technology and industrial know-how of our portfolio of businesses to reduce our and our customer’s waste material to further sustainability goals.

Before I open the call for your questions, I want to provide some closing thoughts on 2023 and our current outlook. The benefits of our diversification strategy were apparent once again in the fourth quarter and the year as a whole as record earnings in HIP provided stability to our overall results at a time when PEM sales prices and margins were at a trough at this stage of the cycle. While the macroeconomic backdrop remains uncertain, I’m more confident in our near-term outlook for a few key reasons. First, customer inventories are at much lower levels, following a prolonged period of destocking activity. As a result, we believe the customer’s orders in 2024 will better reflect demand in our end markets with potential upside as our customers begin to restock as demand improves.

Second, in part, due to these low customer inventory levels, we exited 2023 and began 2024 with solid sales volume momentum. Fourth quarter sales volume in our HIP segment rose 11% year-over-year, and the dialogue we are having with our HIP customers support the momentum we have as we enter into 2024. Meanwhile, fourth quarter sales volume for our PEM segment rose 6% year-over-year and 4% sequentially, which was counter to the normal seasonal decline that we typically see towards year-end.

Third, the solid sales volume momentum is continuing into 2024, supporting price momentum for most of our products in our PEM segment. Recent disruptions in global trade routes from tensions in the Middle East and lower water levels at the Panama Canal also have the potential to disrupt imports and support our pricing initiatives.

Finally, the Federal Reserve has paused a series of interest rate hikes that depress demand and business confidence in 2023. While the future path of interest rate policy is uncertain, the pause and potential for eventual cuts could create a more favorable macroeconomic backdrop for our businesses in 2024, particularly those portions of our business where demand is more sensitive to interest rates, such as housing, construction, energy and autos.

Thank you very much for listening to our fourth quarter earnings call. I will now turn the call back over to Jeff.

Jeff Holy

Thank you, Albert. Before we begin taking questions, I’d like to remind listeners that our earnings presentation, which provides additional clarity into our results, is available on our website and a replay of this teleconference will be available two hours after the call has ended. We’ll provide an information again at the end of the call. Jonathan, we will now take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Patrick Cunningham from Citi. Your question please. Patrick, you might have your phone on mute.

Patrick Cunningham

Thank you. Can you hear me now?

Jeff Holy

Yes, we can.

Patrick Cunningham

All right. Good morning, everyone. So just on the sales and margin guide for the HIP segment, I’m just trying to square what your volume outlook might be, given we have some uncertainty around rate cuts, but you cited pretty solid momentum in that business. So do you expect volumes to grow next year and maybe margin decline is more from continued price declines and stabilizing PVC costs?

Steve Bender

So, Patrick, it’s a good question. And we’ve seen good momentum at this stage as we enter the first portion of 2024. Certainly, depending on the outlook, whether you’re looking at some of the recent statistics by the US Census Bureau on housing starts and permits or are those published by NAHB or John Burns Real Estate, JBRE, the outlook remains, I think, constructive in terms of growth and demand. As we indicated on our prepared remarks, we’re continuing to see good volume pull in the first few months of 2024. It’s hard to project the entire year of ’24 at this stage. But I would say that we remain optimistic, given the volume pull that we’ve seen at this stage.

Patrick Cunningham

Got it. That’s helpful. And then I was hoping you could elaborate on the manufacturing footprint optimization for HIP. So how many assets have you closed and how many maybe are you planning to close in 2024? And what sort of level of run rate savings should we expect and the contribution within that $125 million to $150 million that’s specifically coming from HIP?

Steve Bender

So the restructuring of $20 million that we took in ’23 — in the fourth quarter of ’23 really relates to optimizing some of our assets in the exterior building products business. And so while we’ve taken steps in, whether it be in our stone or other business applications, certainly, we do look to further optimize that over the course of ’24, and the exact plan will be somewhat a function of how the market develops. Certainly, we’re looking to really optimize those — that footprint based on where the market demand is. And if you think of that smile from both coasts along the Southeast and Southwest, we’re well positioned in that marketplace, and we’re looking to make sure that our assets are positioned to be able to meet that market demand. So we don’t have any specific plans that we’re ready to announce for ’24, but I would say, we’re prepared to address those needs depending on market conditions.

Albert Chao

Of those — yeah, I was going to add, some of those cost savings, as a result of the rationalization we’ve done in ’23, we see the benefit in ’24.

Patrick Cunningham

Yeah. That makes sense. Thank you.

Albert Chao

You’re welcome.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Frank Mitsch from Fermium Research. Your question please.

Frank Mitsch

Good morning. Thank you. I do want to come back to the HIP margin question. I appreciate your comments regarding volumes, et cetera. But you reported pretty record margins in the third quarter. So maybe there’s an expectation that, that doesn’t — that doesn’t continue. Is that playing a big role as to why you’re thinking your margins in ’24 will be roughly 300 bps lower than in ’23?

Steve Bender

Yeah. So Frank, we’re exiting, obviously, the end of ’23 with lower price points in some of those discrete products. And certainly, we see rising raw materials cost, as we mentioned, and see some guidance in some of those PEM products. And so this is why we’ve kind of guided to potentially seeing lower margins in the HIP business. Simply, it’s because of the exit rate of prices at the end of ’23 and the potential, and we’re seeing some traction on materials cost in that flow into that business.

Frank Mitsch

Got you. And sticking with the raw materials and inputs and so forth. Obviously, we’ve seen a material collapse in natural gas and ethane for that matter. But on the other side, we’ve seen propane moving up. How do you think about the — from an overall Westlake perspective, the recent movements in NGLs and in nat gas?

Albert Chao

Yeah. Every dollar of gas price dropped 1,000 cubic feet is well over $100 million of benefit. And it’s to say not only that our energy costs going down, but when natural gas prices going down, ethane price going down, so our ethylene manufacturing cost has come down a lot.

Frank Mitsch

Okay. Great. So that’s a bit of a tailwind as we sit here in 1Q, correct?

Albert Chao

Correct. Yep.

Frank Mitsch

Thank you so much.

Albert Chao

Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Aleksey Yefremov from KeyBanc Capital. Your question please.

Unidentified Analyst

Thanks and good morning, everyone. This is [Ryan] (ph) on for Aleksey. So my first question, I want to dig in a little bit on the volumes in PEM. So obviously, volumes rose, I think, 6% year-over-year and 4% sequentially. Is this purely a market-based recovery? Or were there some market share gains in there? And then so far during 1Q, have you seen any aggressive pricing from competitors or like across the industry that may kind of hinder your volumes here, too? Thank you.

Albert Chao

Yeah. PEM business, there are several in polyethylene PVC price announcements, and we got a $0.05 upon price increase in polyethylene in January and further price announcements we made, and the price announcement made in PVC as well. So as you know, also, the springtime is a construction period. And with warm weather, a lot of activities are going on. And as we said, we are seeing momentum with HIP our customers operating orders so the momentum in the fourth quarter is carrying to the first quarter.

Unidentified Analyst

Great. That’s helpful. And then just as you think about running your chlor-alkali facilities here in 1Q, what do you think operating rates are going to be? And then when you think about it for the balance of the year, anything you can quantify there would be helpful. Thank you.

Albert Chao

Yeah. Thank you. Some of the consultant study, that fourth quarter operating rates chlor-alkali in the US is about 76%. And people are projecting — well, it’s down from 82% in third quarter, but people are projecting 2024 chlor-alkali running rates in the high 70s. So we are seeing some improvement. I think about half of the chlorine will go to PVC. So the PVC really drives the running rates for chlor-alkali running rates.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Duffy Fischer from Goldman Sachs. Your question please.

Duffy Fischer

Yeah. Good morning, guys. First question is just around epoxy. When was the point of maximum pressure from Chinese imports into Europe last year? Has that stabilized? And do you think, you need to do anything with your physical footprint in Europe? Or is just the noncash write-down going to be sufficient?

Steve Bender

So Duffy, we saw that really begin to build in the second half of last year, that pressure. And that’s really as we saw the imports continue to ramp up and put pressure on the European markets, and that really is what drove the impairment.

Albert Chao

And we are seeing that — maybe partially because of the Suez Canal, freight rates and everything else is that the import is reducing volume. And as a result, also European liquid epoxy resin prices start moving up.

Steve Bender

And we’re taking certain — certainly you could see from our prepared remarks, Duffy, that we’re taking actions to manage our cost and become competitive in that marketplace so that while we understand that the market needs to balance itself out, given the still weakness in Asia and European markets from a demand perspective, we’re certainly being proactive in reducing our cost and being really focused to remaining competitive in that epoxy space.

Duffy Fischer

Great. Thank you. And then maybe just to go back to the 6% volume number from Q4. Can you break that out or at least tell us if some of the products within PEM were meaningfully different than that 6%? And how much of that was driven by domestic versus export volume?

Steve Bender

Yeah, there was a bigger move in some of the exports. And so in my comments, we talked about some of the product shift. And that product shift is really moving some of that PVC and caustic into the export markets. And certainly, the netbacks of those because of shipping duties and such, those netbacks are lower, but still attractive, and that’s the volume pickup we saw was in caustic and PVC and PEM.

Duffy Fischer

Great. Thank you guys.

Steve Bender

You’re welcome.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Salvator Tiano from Bank of America. Your question please.

Salvator Tiano

Yes, thank you very much. So I wanted to come back to epoxies and I’m trying to see if you can a help me quantify what has been the impact versus when you gave some numbers a couple of years ago with your major acquisition? How much of that earnings power has been lost here? And also, what’s kind of your view for epoxy earnings, either quantitatively or at least directionally in 2024 versus 2023? And also, are you seeing kind of an epoxy upward price pressure that some trade vouchers are reporting in Europe?

Steve Bender

I would — I was going to comment, as Albert noted earlier in his comments, certainly, some of the trade flows, because of the hostilities in the Middle East, Red Sea and the Panama Canal, certainly have given some buoyancy to pricing that we’ve seen across the product spectrum because of the higher cost. And certainly, as I mentioned earlier, we’ve seen some buoyancy in overall pricing. So certainly, the markets here in the United States are stronger than they are in Europe because of the strength in the overall economies.

Salvator Tiano

Okay. And if I may ask a little bit on the HIP guidance for 2024. I know that in your adjusted EBITDA, you’ve not actually got some of the restructuring items such as the $20 million you incurred in Q4. I’m wondering, do you have any substantial restructuring charges baked in the 20% EBITDA margin for 2024?

Steve Bender

Not at this stage. And so as I mentioned, the range of $4 billion to $4.4 billion revenue and the 20% margin that we’ve guided to is not reflective of any assumed changes in restructuring costs that would flow through in ’24. As I mentioned to an earlier question, the lower margin is purely a function of that we exited ’23 with lower prices in our building products segment and we’re seeing rising prices, some of those inputs such as in PVC. So we’ll see how that plays through. But given the fact that we’re seeing an exit at lower price points and rising input costs such as in PVC, that could put some pressure on margins.

Salvator Tiano

Okay. Thank you very much.

Steve Bender

You’re welcome.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Mike Leithead from Barclays. Your question please. Mile, you might have your phone on mute.

Mike Leithead

Can you hear me now?

Operator

Now we can. Yeah.

Steve Bender

Yes, we can.

Mike Leithead

Hey, good morning guys. Just on the litigation charge in the quarter, can you help clarify what this was related to? And is there an expected cash outlay associated with this charge at some point?

Steve Bender

Yeah, Mike, it was related to an event in Louisiana, and we’ve disclosed this in our 8-K earlier this quarter as well as our 10-Q filings earlier last year. I do expect the outlays to be in the first half of this year.

Mike Leithead

Great. Thank you. And then just second, briefly, I want to ask on Westlake Partners. Obviously, the distribution — the share price has been relatively flattish for some time, where we now have a bit of higher interest rates and the like. Can you just talk about how the MLP fits within the overall Westlake strategy here going forward?

Steve Bender

Sure, Mike. So the strategy here was always to raise capital at a value proposition that was greater than that of Westlake Corporation, and we’ve done that. We’ve raised about $500 million of capital — equity capital in that manner. And so certainly, as we’ve seen the markets in the MLP space have been challenged. And certainly, in a structure as we have with higher interest rates, the MLP has yielded a higher yield. If we do see lower interest rates begin to materialize with the Federal Reserve potentially cutting rates later this year, I would expect that yield to decline and prices to rise. So we’ll see how the Federal Reserve acts later this year, but certainly, that opportunity does exist.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Arun Viswanathan from RBC Capital Markets. Your question please.

Arun Viswanathan

Great. Thanks for taking my question. Good morning. So just trying to think about profitability, I guess, as you move forward into Q1. So when you look at the $390 million or so of EBITDA that was reported in Q4, how much of that decline sequentially from 3Q to Q4 would you attribute to seasonality? And are there any other discrete items in there that may reverse as you move into Q1?

Steve Bender

So, Arun, we’ve seen prices almost across the spectrum on the chemical side of our business somewhat decline over the course of the — from the end of the third quarter into the fourth quarter. But if you think about the price nominations that are out in the marketplace, with the $0.05 that was settled for polyethylene in January, we’ve got additional announcements for prices out for later this quarter. PVC has price nominations out. And we’ve seen some traction with prices that were nominated in fourth quarter going into effect in caustic for the first quarter. So when you think of the momentum we’ve seen in pricing initiatives, when you think of the volume because of the low inventory levels we see with our customer base, and the exiting, as you could see, our guidance in terms of exiting ’23 with increases involved on the PEM side, which is counter to the typical seasonal behavior we see, those are all positive and constructive directions. On the building products side, on HIP, we certainly also saw what I would characterize as a typical seasonal decline in volumes, and you see the guidance that we’re providing for HIP in ’24. So we remain constructive for the look forward ended 2024.

Arun Viswanathan

Okay. And then just a quick question on kind of integration levels. Would you characterize these opportunities set in front of you? How much do you think you still have in front of as far as debottlenecking or maybe other opportunities to increase your integration levels? And I guess — where would you find that most as far as whether it be ethylene or maybe on the chlor-alkali side?

Albert Chao

Yeah, it’s a good question. We have smart engineers. They always find ways to improve in debottleneck, and sometimes the debottleneck can be a bit more than the debottleneck. So we’re currently looking at what opportunities we have, what the cost, what the benefit, depending on the cycle or part of the cycle, whether it’s a good time to expand now, expand a bit later. That happens in PEM and also in HIP, we’re looking at — some of the rationalization is we have moved equipment from one region that’s a slower growth to a region that’s higher growth. So we are doing all the stuff to optimize our footprint in the HIP side as well.

Arun Viswanathan

And if I could just ask a similar follow-up on that. Just do you think, just given the utilization rates, I guess, in chlor-alkali that there’s more high-cost capacity within your own system that could be rationalized or maybe some peers, I know there’s been some rationalization from the largest peer in the industry. But how do you kind of characterize the supply-demand balance within caustic and chlorine as you look out for the next year or two?

Albert Chao

Yeah, that’s a good question. We constantly look at the productivity and cost position of our plans and where necessary, we should take actions. But one thing is that, as you have heard from our discussions, Westlake benefits from the integration from chlor-alkali to PVC to the HIP businesses. And those integration really helps to, as we said, when the upstream is better, we benefit from upstream and we can take the part as a downstream and vice versa. When downstream’s better, we take benefit from downstream, we still keep our upstream running. So those interactions are different from some other competitors of ours. And we’re able — by looking at the whole totality, not just at a unit by itself.

Arun Viswanathan

Thanks.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Josh Spector from UBS. Your question please.

Josh Spector

Hi, good morning. First, I wanted to follow up on HIP pricing. So when you talk about the lower exit rate into ’24, pricing in the quarter sequentially was actually a bit better than what we expected. So was there a reset in December, that would mean that we see a couple of percent lower? And when you talk about rising costs, PVC, et cetera, you passed a window where you think you can get additional pricing to offset that for next year?

Steve Bender

No, Josh, I think — if you think about the year-over-year change in prices, we certainly saw probably about a 10% reduction year-over-year in sales prices in HIP. And certainly, at the end of the year, prices were basically flat. And so I’m really comparing the average price of ’23 to the exiting price at the end of ’23 when I talk about the exiting price, really thinking about the average price as we go forward. Certainly, we have not got ourselves in a position where we’re locked up for the year from a pricing perspective. So if we see continued good strength in volume growth, certainly, as I mentioned, we’re seeing increased nominations in prices for inputs such as PVC. We do have the opportunity, given the demand picture, to be able to raise those prices. It’ll be a function of really do we continue to see the strength in demand over the course of ’24 that we’re seeing in the early stages here of ’24. If we do, obviously, we’ll be able to take price action accordingly.

Josh Spector

I appreciate that. And then just within PEM. When you talked about some of the volume strength, I mean, you keep alluding to more exports. So can you share roughly where your export mix was of PVC and caustic versus a normal fourth quarter? And how you expect that to trend over the next couple of quarters?

Albert Chao

Yeah. Our fourth quarter — usually demand is lower in the PVC side, we export more than the third quarter. As a result, the average sales price has come down. But I think the ACC reported that PVC exports is about 37% in January. And I think 35% to 40% is the range that PVC industries been exporting.

Josh Spector

Okay. Thank you.

Albert Chao

You’re welcome.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Matthew Blair from TPH. Your question please.

Matthew Blair

Hey, good morning, Albert and Steve.

Matthew Blair

Albert, looking at this $3.3 billion of cash on the balance sheet, could you talk a little bit more about what you’re seeing in the M&A market? Is deal flow picking up? And if you do a deal, are you more focused on opportunities in HIP than in PEM?

Albert Chao

Yeah. That’s a good question. Yes, we are seeing more ideas — deals on banks, even though the deal flows have not really picked up, we’ve seen some industry announcements of people buying assets or companies in the HIP business. And suddenly, for Westlake, we’ll look at both sides, what makes the best economic return for Westlake through our synergies. So whether it’s in PEM side or HIP side, we constantly look at deals and on a global basis, not just in the US, and when you add economic value to us, we’ll take a hard look at those deals.

Matthew Blair

Sounds good. And then some of the consultants are showing PVC — global PVC capacity growth this year, around 3%. Does that match up with your expectations? And would you expect global PVC demand growth to be stronger than 3% this year?

Albert Chao

Yeah. I think we believe capacity additions is really not that great. People talk about China, especially with the carbide process being on the moratorium of new build and there’s some ethylene-based PVC plants starting in China, but the cost is a lot higher from either on produced ethylene or imported EDC. So I think global demand, that’s the key question. And some of this is political macroeconomic related. And the other one, interest rate related. So we are blessed that the US has, by far, the lowest cost position from low-cost ethane, ethylene and low-cost power to make chlor-alkali. So we’re able to export, as we mentioned in our talk earlier, they’re able to capture any opportunities that comes up for export. If the US demand is out there, or not enough. So that’s why we mentioned, in the fourth quarter, we did more export than second and third quarter, and we can still capture good cash contributions.

Matthew Blair

Great. Thank you.

Albert Chao

You’re welcome.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Jeff Zekauskas from JPMorgan. Your question please.

Jeff Zekauskas

Thanks very much. Did epoxy profits meaningfully decrease sequentially?

Steve Bender

Yes. Jeff, it’s Steve. Yes. And when you think of the profit contributions, they were continuing to decline over the second half of 2023. So sequentially, from 3Q to 4Q, they certainly declined and they declined from 2Q into 3Q. So there was a sequential decline over the course of the second half of the year.

Jeff Zekauskas

Okay. And then in your earlier remarks, you highlighted the sequential decline in PEM as the result of lower caustic soda prices. So if that was the largest component, like order of magnitude, were they lower by $100 a ton in the quarter sequentially?

Albert Chao

Yes. I would think combination of caustic and as well as some PVC price drop. But you’re right, I think caustic — last year, they dropped materially over, I think, $300 for the whole year last year. Every month, it dropped except, I think, in January or February now, we are seeing the first price increase. I think looking at — according to CMA reported $5 a term price increase in February, and that’s the first time for 14 months, that caustic price has not dropped, actually went up.

Jeff Zekauskas

Okay. And then in Housing and Infrastructure Products year-over-year in the fourth quarter, was that $53 million increase really fittings and pipes related? Or was it related more to the other parts of the HIP’s business?

Steve Bender

Yes. So Jeff, the contribution from both the pipe and fittings business and, frankly, our siding and trim business were strong in that period. So it’s both pipe and fittings and siding and trim business.

Jeff Zekauskas

And then lastly, you talked about raw material cost inflation in HIPs. I don’t think there’s any raw material cost inflation in PVC. So where is the raw material cost inflation coming from in HIPs for 2024?

Steve Bender

Yeah. So Jeff, I’m speaking to the PVC price nominations that we see that are out in February by all the producers at this stage. So Westlake and all the others have price nominations out for February. And so certainly, as we look forward, given the volume demand we’re seeing in our downstream building products businesses. And we mentioned the strength that we’re seeing as we exited 2023 into ’24 in the building products side of our business, seen the pull on those products, which should pull on the PVC resin. And this is why we’re seeing that pull and why we’ve seen price nominations by all the producers in the marketplace.

Jeff Zekauskas

But you’re — so what you’re saying is that the margins because you transfer at market from PEM, the margins in HIPs will be pushed down and the margins in PEM will be pushed up, all things being equal. Is that right?

Steve Bender

Correct.

Jeff Zekauskas

Yeah. Thank you very much.

Steve Bender

You’re welcome.

Operator

And our next question comes from the line of Richard [indiscernible] from Wells Fargo. Your question, please.

Unidentified Analyst

Great. Thanks for taking the question. First, on the HIP segment. Just wondering about the competitive landscape, the 11% year-over-year volume growth. Does that reflect any market share gains within the product lines? And where are you seeing the strongest increase in prices?

Steve Bender

So we’ve seen some good traction really with our customer base. You’ve seen us make many references to the portfolio and the brands that are associated with that portfolio. And so having a nationwide footprint and a broad and strong product offering allowed us to really make good contributions in market share gains and certainly building relationships with many of these distributors who are servicing many of the nationwide homebuilders is really where we’re seeing good traction.

Unidentified Analyst

Okay. Great. And then on the pricing side, are you seeing a more competitive pricing landscape? Or is that just pricing pressure, given lower housing starts and the weaker macro outlook year-over-year?

Steve Bender

I would say, we’ve been able to really maintain, and you saw this in the fourth quarter relative to the third quarter, pricing was relatively flat in HIP. And so I would say that we were able to maintain pricing in — sequentially from 3Q to 4Q, as we pull into the first quarter of ’24, continuing to see good volume and certainly trying to then be the beneficiary of that volume pull, my guidance, and we’ve talked about this in a couple of the other questions, that we do have some price nominations out for PVC resin. And so certainly, if we see strength in PVC demand-related products, siding, trim, shutters and other applications, we will certainly try to not pass those higher prices, certainly try to pass those higher prices through and not get caught in a margin compression, but we’ll see how the market demand-wise plays through.

Steve Bender

Great. Thank you.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Vincent Andrews from Morgan Stanley. Your question please.

Turner Hinrichs

This is Turner Hinrichs on for Vincent. I’m wondering if you could provide an update on what you’re seeing for inventory levels among customers and where you’re expecting tailwinds from restocking mentioned in your prepared remarks?

Albert Chao

Yes. Talking about PEM customers or HIP customers?

Turner Hinrichs

In particular, the — whichever channels we’re seeing the restocking mentioned, but PEM would be of interest in particular.

Albert Chao

Yeah. I think as you can tell, when prices come — came down and demand came down last year, customers tend to be — have low inventory levels and they order — only order when they need products. And so over year-end, also they don’t need to carry inventories. So as we come into January, February of this year, customers are starting to order to their demand. And so we are seeing the order going up. But I think inventory is still — customer is very cautious they are still keeping relatively low to medium levels of inventory. And that’s true also for the HIP side. And — but as you know, this is the good material construction starting — usually starting from March is the season people start increasing construction. And with the warmer weather, people stopped it earlier. So I think they are just ordering to meet the demand, make sure they have good — they have the products because if you miss one item, the house is not complete. So they want to make sure they have all the items delivered to the site, that they he can put a house together relatively quickly.

Turner Hinrichs

Great. Thanks for all the detail there.

Albert Chao

You’re welcome

Turner Hinrichs

I’m also wondering you do provide a little additional color on your outlook for the caustic soda industry and prices during 2024? I was wondering specifically also whether or what you’re expecting in the first quarter in terms of price and volume, and whether the increase you saw in caustic soda prices was driven by trade and freight dynamics from your perspective or underlying supply and demand?

Albert Chao

Yes. I think supply-demand has improved. I think we see some pulp and paper plants are running harder and they’re ordering caustic and chlorine. Now, as I mentioned earlier, the CMA’s forecast for operating rates for chlor-alkali in the US are running in the high 70s, which is okay, but not great. So this is their forecast now, things could change. But I think also, export prices started moving up. And again, the consultants, CMA looking at $5 increase in February and April is $10 and May is $5. Now, the industry that we have announced the price increase and other companies announced pricing increase more than what CMA has announced. And time will tell how much of our industry announcement will get put in place, but it’s a substantially higher price increase announced by the industry.

Turner Hinrichs

Okay. Great. Thank you.

Albert Chao

You’re welcome.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Kevin McCarthy from Vertical Research Partners. Your question please.

Kevin McCarthy

Yes, thank you and good morning. With regard to your PVC production in 2023, I was wondering if you might be willing to split it into three buckets? Those would be the amount or percentage that you used internally in HIP versus US domestic sales versus export sales. How would you size each of those?

Steve Bender

Yeah, Kevin, it’s Steve. Because we’re using a lot of that PVC resin really in our Building Products business, roughly a quarter of it is going into the building products business into the HIP business, and the remaining 75% of that is sold either domestic or international, because we are selling so much of that 25% domestically, our mix relative to industries, therefore, is going to be a lower mix of exports relative to the industry average. So obviously, to the extent that we see the strong markets, domestically, we’d rather sell it domestically versus export. And that really — that percentage is always going to be lower than industry average because of that domestic — that internal sale. But I would say we certainly focus on the domestic market as much as we can and pivot to the export markets when there’s seasonal elements at play such as in the fourth quarter those exports tend to be higher. And certainly, it’s also a function of how strong the domestic market is. So it’s hard to give you a hard and fast percentage of domestic or export per se.

Kevin McCarthy

Understood. That’s helpful. And then just coming back to the caustic soda discussion. Would you expect your average selling prices in the first quarter relative to the fourth quarter of 2023 to be higher or lower or roughly the same?

Steve Bender

You were asking about the average selling price for caustic in the first quarter versus the fourth quarter of 2023?

Kevin McCarthy

Yeah, that’s correct. 1Q is obviously more than halfway done. So just kind of curious if you look at your books for the next six weeks or so, you referenced some of the uptick in caustic prices in February. So one could argue, perhaps we’re coming off the bottom a little bit. But if I just think about that sequential move from 4Q into 1Q, do you think the result might be materially different in terms of your realized price for caustic?

Albert Chao

Well, the — according to CMA, fourth quarter last year 2023, caustic price domestically dropped by $60 a ton. And I said earlier, CMA looking at $5 increase in February and then $10 in April. So…

Steve Bender

So the average price will be lower in 1Q. I just want to make sure you were talking about 4Q versus 1Q ’24. Clearly, with the decline in price we’ve seen through ’23, the average price in ’24 will be lower than the fourth quarter average price in ’23.

Kevin McCarthy

Got it. Okay. Thank you very much.

Albert Chao

You’re welcome.

Operator

Thank you. One moment for our next question. And our next question comes from the line of David Begleiter from Deutsche Bank. Your question please.

David Begleiter

Thank you. Albert, how do you expect ethylene chain margins to progress through 2024?

Albert Chao

That’s a good question. As I said earlier, there are price increase, we have $0.05 a ton price increase achieved in January, and there are price increase announced for February, and one industry participant announced the price increase for March. And so we are seeing some improvements in export price. So we believe that some part of the price increase will go through, but in the first quarter, a lot depending on global economy, supply demand, macroeconomics and also the Red Sea, Suez Canal issues and Panama Canal, when will it be settled or subside issues. So all these have to come into play in terms of our pricing and volumes moving international trade. As you know, in polyethylene, the US exports a large quantity, I think close to about 50% plus or minus of total USP produced is exported. So export is a big component of it. So all these dynamics is difficult to forecast what would happen. But we believe, at least domestically, in the first quarter, things should be better. And we mentioned earlier, that with lower price of natural gas and ethane, the ethane-based production costs should be low if you have polyethylene price increase, the margin should improve.

David Begleiter

Got it. And adjusting your cost savings in ’23 and ’24, how much will come from epoxy?

Albert Chao

Proxy is not a big part of the Westlake’s business. And we’re talking about — the problem was the Pernis, Netherlands plant epoxy that we have problems with. And you heard also, we are doing substantial cost reduction programs to make the system better and — but still Asian exports to Europe and is a big issue of keeping prices low. But epoxy as a whole is a small part of Westlake’s business.

David Begleiter

Thank you.

Steve Bender

And David, just maybe to give you a broader understanding of that savings over the course of ’24, I would guide to probably three quarters or so of that would probably be on the PEM side of the business and the other 25% probably be on the HIP side of the business. So you have an understanding of the relative expected mix of that savings of $125 million to $150 million that we expect to benefit from.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Hassan Ahmed from Alembic Global Advisors. Your question please.

Hassan Ahmed

Good morning, Albert and Steve. A question around — good morning. A question around the chlor-alkali markets. Over the last couple of years, I mean, certainly since the end of 2020, the virtue of sort of the chlor-alkali story had been a high degree of discipline, particularly in the North American market, right? And obviously, that resulted in decent sort of pricing growth, margin growth and the like. And then obviously, we started seeing destocking over the course of the last couple of quarters, and some pricing and margin erosion, right? And we all talked about sort of operating rates in North America being relatively depressed, but demand beginning to pick up. Now, one of your larger competitors out there has been pretty vocal about potentially ramping up utilization rates February onwards. So my question to you is, what gives you confidence that the industry will continue to remain disciplined, particularly keeping in mind operating rates, I think you alluded to them being around 70%, and you holding on to pricing or maybe even gaining some?

Albert Chao

Yeah. Very good question. And I think a big part was export price. When export prices was high, then the US enjoyed also high domestic price. But export price start to decline pretty sharply, 2023. And so US domestic market has to respond. And we are seeing signs that the export price stabilize and start moving up a little bit. So I think the economics have — whether it’s going to the alumina business or pulp and paper, as we said earlier, we see some sign of improvement and demands increasing international caustic market. There’s not a huge amount of capacity added globally. It’s really a demand issue, not a supply issue. And hopefully, as economics improves globally and also China’s economy improves, we are hearing that the government in China is trying to, again, stimulate its construction business after the New Year’s over, only time will tell what kind of initiatives they will have. If the global economy stabilizes and continue to recover and grow and lower interest rate, it will help caustic — caustic is such a broad industrial chemical, it’s used — it goes into many, many segments of our economy, consumer, industrial, investment, all that. So it’s a bellwether of the global economy. And we hope this year, things will bottom out, or last year, bottom out and getting better. So we are optimally cautiously optimistic on caustic market, but a lot of things could happen.

Hassan Ahmed

Fair enough. And as a follow-up on the PVC side of things, you touched on China earlier. I mean, let’s assume for a second that there is no stimulus in China. Obviously, barring that, I’d like to think that the Chinese market is quite long PVC. So what are you guys seeing in terms of trade flows out of China, on the PVC side in particular? And barring a stimulus, could that be a risk maybe potentially even to domestic US pricing if China ramps up exports?

Albert Chao

Yeah. I think as I said earlier, China’s [ex] (ph) PVC, 80% is on the carbide based, it’s not welcomed maybe on South Asia maybe or South Asia, but you don’t have carbide PVC going to Europe or go into North America. So — and there’s a moratorium on new build. So really, it’s existing demand, existing capacity, that’s the problem in China as Chinese infrastructure and residential improves, then the demand PVC will improve. But we’ve seen last year, Chinese PVC exports, as I said, to South Asia and South Asia. But we are seeing a big slowdown because the Chinese government are trying to really reduce carbon emissions and pollutions and the double control from GDP — carbon emissions per GDP by cities and province are really — people are watching carefully. And so we don’t expect the Chinese PVC be flooding the market. And then also, still a high cost. Energy is still higher cost in the US.

Hassan Ahmed

Fair enough. And since I have you, one last one, if I could squeeze it in. Just you talked about sort of lower margins, Q3 to Q4, primarily on sort of higher export demand in PVC and caustic. And obviously, that coincided with all the sort of shipping related cost escalation that had happened on the back of the Red Sea. I mean, did that play a material role in some of the margin squeeze that you guys saw in those two product areas in particular?

Albert Chao

You’re absolutely right. The shipping freight rates, we heard increased by $200 to $300 a ton. That could be even higher. And also delayed route arrival. It’s really impacted the global trade. And since we’re talking about Asia exports to Europe and some to the US, it has stopped or slowed down a lot of that. And I think that helped also supporting price increase as we said in our remarks, going up.

Hassan Ahmed

Very helpful, Albert. Thank you so much.

Albert Chao

You’re welcome.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Salvator Tiano from Bank of America. Your question please.

Salvator Tiano

Just wanted to check, essentially, you’re pretty much saying that your HIP guidance, about 20% EBITDA margin, it’s contingent on the $0.05 per pound PVC price increase. So I’m wondering, if that doesn’t go through or if price overall for the year don’t increase as much, how much would that benefit HIP earnings on the expense of PEM earnings?

Steve Bender

So as I indicated, I think that the guidance that we provided is reflective of our outlook today. Certainly, if we don’t see that strength in PVC that raised that price, we haven’t seen reductions in building products prices at the end of the year. You saw that they were relatively flat. So the contribution, really, to the HIP side of the business should continue to be constructive. Obviously, we’re more heavily weighted on the PVC side. So obviously, while there is benefit of having lower input costs, we have more heavily weighted volume in PVC than we do in the building products using that PVC. So it would be more constructive to get that price nomination of PVC accrued for the — when you think of the whole of Westlake.

Salvator Tiano

Okay. Perfect. Thank you very much.

Steve Bender

Welcome.

Operator

Thank you. This does conclude the question-and-answer session of today’s program. I’d like to hand the program back to Jeff for any further remarks.

Jeff Holy

Thank you. Thanks again for participating in today’s call. We hope you’ll join us again for our next conference call to discuss our first quarter 2024 results.

Operator

Thank you for participating in today’s Westlake Corporation Fourth Quarter and Full Year Earnings Conference Call. As a reminder, this call will be available for replay beginning two hours after the call has ended. The replay can be accessed via Westlake. Goodbye.