Westlake's Q3 2025 Earnings Call: Contradictions Emerge on Distribution Growth, Cash Flow Coverage, and Turnaround Impacts

Date of Call: October 30, 2025

Financials Results

• Revenue: $309M consolidated net sales (includes OpCo)
• EPS: $0.42 per unit (Net income $15M); Westlake Partners net income lower vs Q3 2024

Guidance:

• No planned turnarounds for remainder of 2025 or in 2026.
• Ethylene Sales Agreement renewed through end of 2027 with no changes to terms or pricing formula.
• Distributions expected to remain supported by predictable fee-based cash flow covering ~95% of OpCo production.
• Will evaluate growth via four levers: increase OpCo ownership, acquisitions, organic expansions, and negotiating higher fixed margin.
• Maintain strong balance sheet and conservative leverage metrics (~1x).

Business Commentary:

• Distributable Cash Flow and Distributions:
• Westlake Partners reported distributable cash flow for the third quarter of 2025 as $15 million or $0.42 per unit, which was $3 million lower than the same quarter in 2024.

• The reason for this decline was attributed to higher maintenance capital expenditures due to changes in the timing of maintenance activities between 2025 and 2024.

• Ethylene Sales Agreement Renewal:

• Westlake's OpCo and Westlake Corporation agreed to renew the Ethylene Sales Agreement through the end of 2027, maintaining the same pricing formula and sales volume protections.

• The renewal demonstrates Westlake's commitment to supporting OpCo's operations and stable cash flow, ensuring reliable distributions to unitholders.

• Stable Business Model and Distribution Growth:

• Since the IPO in 2014, Westlake Partners has made 45 consecutive quarterly distributions to unitholders, growing distributions by 71% since the Partnership's original minimum quarterly distribution of $0.275 per unit.
• The stability of the business model, supported by the fixed margin ethylene sales agreement, minimizes market volatility and ensures consistent cash flows, enabling reliable distributions.

Sentiment Analysis:

Overall Tone: Positive

• Management emphasized stability: "renew the Ethylene Sales Agreement through the end of 2027 with no changes," noted "45 consecutive quarterly distributions," and highlighted a "predictable fee-based cash flow" and strong leverage (~1x), signaling confidence in sustaining distributions despite soft macro conditions.

Q&A:

• Question from James Altschul (Aviation Advisory Services, Inc.): I noticed that the distributable cash flow for the quarter was less than the amount of distribution per unit. What is the outlook for getting the distributable cash flow up to a level, again, where the distribution will be covered?
  Response: Turnaround-driven temporary shortfall; turnaround is complete, production and operating surplus should rebuild and management expects distributions to be well covered going forward (pro forma, without the turnaround DCF would have exceeded the distribution).

Contradiction Point 1

Distribution Growth and Cash Flow Coverage

It involves differing perspectives on the likelihood of Westlake LP seeing distribution growth in the near future, which is a critical consideration for investors, impacting their confidence in the company's financial health and dividend sustainability.

Will distributable cash flow return to a level that covers the distribution? - James Altschul(Aviation Advisory Services, Inc.)

2025Q3: I would fully expect that distribution to continue to be well covered by the cash flows of the business. - Steven Bender(CFO)

Which of the four growth levers are most attractive in the current environment? How likely is distribution growth for Westlake LP by late 2025 or 2026? - Matthew Robert Lovseth Blair(Tudor, Pickering, Holt & Co. Securities, LLC, Research Division)

2025Q2: Given the contraction of markets and the lack of immediate need for Westlake Corporation to attract equity capital, I don't see a need in the current year to raise equity capital through one of these 4 levers. - Mark Steven Bender(CFO)

Contradiction Point 2

Impact of Turnarounds on Distributable Cash Flow

It directly impacts expectations regarding the financial performance of the company, specifically how turnarounds affect distributable cash flow, which influences investor confidence and distribution coverage ratios.

What is the outlook for getting distributable cash flow to cover distributions? - James Altschul (Aviation Advisory Services, Inc.)

2025Q3: The entire reason for that was the planned turnaround. And when we have planned turnarounds, it does impact, of course, production and therefore, sales. And so it's not unusual when we have these planned turnaround events for our coverage ratio to dip below the 1.1 target and to have some impact on those -- on that cash flows. - Steven Bender(CFO)

Why was the Q1 Petro 1 turnaround's financial impact on quarterly earnings more significant than previous ones? Was this due to the size of the turnaround or unplanned expenses? - Matthew Blair (TPH)

2025Q1: The impact of the turnaround was as expected, with the unit down in February and March. The elevated interest rates may have contributed to the perceived financial impact. - Steve Bender(CFO)

Contradiction Point 3

Impact of Turnarounds on Distribution Coverage

It highlights differing expectations and explanations regarding the impact of planned turnarounds on distribution coverage, which is crucial for understanding the financial health and sustainability of the company's dividend policy.

What is the outlook for distributable cash flow to cover the distribution per unit again? - James Altschul(Aviation Advisory Services, Inc.)

2025Q3: The entire reason for that was the planned turnaround. And when we have planned turnarounds, it does impact, of course, production and therefore, sales. And so it's not unusual when we have these planned turnaround events for our coverage ratio to dip below the 1.1 target and to have some impact on those -- on that cash flows. - Steven Bender(CFO)

What is the expected financial impact of the 60-day planned turnaround? - Matthew Blair(TPH)

2024Q4: The turnaround will impact the coverage ratio due to the loss of production during the period. However, once the unit comes back on stream, coverage should fully recover. - Steve Bender(CFO)

Contradiction Point 4

Future Coverage of Distributions by Cash Flows

It involves differing expectations for the future coverage of distributions by cash flows, which is a critical aspect for investors to assess the sustainability and growth prospects of the company's dividends.

On a pro forma basis, is it reasonable to assume that distributable cash flow would exceed the distribution without the impact of the turnaround? - James Altschul(Aviation Advisory Services, Inc.)

2025Q3: I would fully expect that distribution to continue to be well covered by the cash flows of the business. - Steven Bender(CFO)

What is the expected financial impact of the 60-day planned turnaround? - Matthew Blair(TPH)

2024Q4: Once the unit comes back on stream, coverage should fully recover. - Steve Bender(CFO)