Westlake (WLK) Q4 2025 Earnings Call Transcript
Westlake (WLK) Q4 2025 Earnings Call Transcript
Motley Fool Transcribing, The Motley FoolTue, February 24, 2026 at 6:02 PM UTC
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Tuesday, Feb. 24, 2026 at 11 a.m. ET
CALL PARTICIPANTS -
Executive Chairman — Albert Chao
President and CEO — Jean-Marc Gilson
Executive Vice President and Chief Financial Officer — Mark Steven Bender
Director, Investor Relations — Jeff Holy
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TAKEAWAYS -
Net Loss -- $33,000,000 or $0.25 per share in the quarter, reflecting both lower sales prices and volumes.
Sales -- $2,500,000,000 for the quarter and $11,200,000,000 for the full year, declining 8% with a 5% volume drop and 3% lower average sales price.
EBITDA -- $196,000,000 in the quarter, $1,100,000,000 for the full year, both excluding $511,000,000 of identified charges for restructuring and asset closures.
Identified Items -- $511,000,000 in inventory write-offs and accrued expenses mainly from shutting four PEM facilities in North America and Pernice, Netherlands, and HIP cost actions.
Cost Reductions -- Achieved $170,000,000 in structural reductions in 2025 including $60,000,000 in the quarter.
HIP Segment Sales -- Decreased 8% year over year in the quarter due to weaker North American residential construction, partially offset by municipal pipe demand.
HIP EBITDA Margin -- 20% for the year, with full-year segment EBITDA of $839,000,000 aligning with company guidance.
PEM Segment EBITDA -- $45,000,000 for the quarter (down $45,000,000 sequentially) and $267,000,000 for the year, pressured by global overcapacity and margin compression.
PEM Average Sales Price -- Declined 5% in the quarter, with global overcapacity in polyethylene and core vinyls cited as key drivers.
Three Pillar Strategy -- Management projects a $600,000,000 earnings improvement in 2026: $200,000,000 from asset footprint optimization, $200,000,000 from cost reductions, and $200,000,000 from operational reliability.
Headcount Reduction -- 6% full-time workforce decrease in 2025, with an even larger reduction in contractor labor, due to asset closures.
Cash and Debt -- $2,900,000,000 in cash and securities against $5,600,000,000 in total debt as of December 31, 2025; debt maturity averages sixteen years.
Free Cash Flow and CapEx -- 2025 net cash from operating activities was $225,000,000; capital expenditures totaled $241,000,000; 2026 CapEx guidance is $900,000,000.
Shareholder Returns -- $335,000,000 returned to shareholders in 2025 via dividends and repurchases.
2026 HIP Guidance -- Revenue expected between $4,400,000,000 and $4,600,000,000, with an EBITDA margin of 19%-21%.
Tax and Interest Guidance for 2026 -- Effective tax rate expected at 17%, cash interest expense approximately $215,000,000.
Sustainability Achievement -- Management reported that "we achieved our emissions reduction goal six years early," having reduced carbon intensity by 20% ahead of the 2030 target.
CFO Retirement -- Mark Steven Bender will retire after 2026 transition period; company has initiated a search for his replacement.
China VAT Drawback -- Management noted, "removing, effective April 1, that VAT drawback or that duty drawback is about a 13% impact in overall pricing." for Chinese PVC exports.
Westlake (NYSE:WLK) disclosed a significant GAAP net loss for the period, stemming from extensive restructuring charges related to asset closures and strategic realignment.
Management underscored the execution and impact of its three pillar strategy, projecting a $600,000,000 improvement in earnings for the next fiscal year, equally distributed across asset optimization, cost reductions, and operational reliability. The company outlined specific segment guidance, stated forward-looking expectations for margins and capital expenditures, and reported an early achievement of its sustainability commitments.
Management confirmed a full-year 2026 capital spending plan aligned with depreciation, targeting approximately $900,000,000, lowering outflows compared to the prior year.
The company expects $200,000,000 of additional structural cost reductions in 2026, building upon the $170,000,000 accomplished in 2025, with a portion allocated to both HIP and PEM segments.
According to management, the closure of North American core vinyl facilities and the Pernice epoxy plant, completed at year-end, positions PEM for an annual EBITDA benefit of approximately $100,000,000 by reducing exposure to low-priced export markets.
HIP will see full-year contributions from the ACI acquisition and benefits from product innovation, including new PVCO pipe production, to support both revenue and margin growth.
Management cited current signs of order book and market improvement, referencing the ISM index returning to expansionary territory and a lower average thirty-year U.S. mortgage rate (6.2% versus 7% a year prior) as factors improving housing affordability and demand potential.
The company confirmed continued internally generated free cash flow is a priority, supported by reduced capital expenditures and targeted cost improvements across business segments, though no direct guidance was provided.
With respect to tariff policy, management stated that the USMCA framework limits exposure to new U.S. tariffs for plastic pipes and current measures remain "de minimis" for the business.
Management explained that incremental cost reduction efforts for 2026 will span manufacturing, logistics, and procurement and are not solely linked to completed asset closures.
INDUSTRY GLOSSARY -
HIP: Housing and Infrastructure Products segment, which includes PVC compounds, exterior building products, and related infrastructure materials.
PEM: Performance and Essential Materials segment, focused on core petrochemical products, including polyethylene, PVC resin, and epoxy resins.
PVCO: Molecularly oriented polyvinyl chloride pipe, offering enhanced strength, durability, and hydraulic performance.
Duty Drawback: Chinese government policy refunding certain export-related value-added taxes (VAT), removal affects global export pricing.
Full Conference Call Transcript
Jeff Holy: Thank you, Amber. Good morning, everyone, and welcome to the Westlake Corporation conference call to discuss our fourth quarter and full year results for 2025. I am joined today by Albert Chao, our Executive Chairman, Jean-Marc Gilson, our President and CEO, Mark Steven 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: Housing and Infrastructure Products, which we refer to as HIP or Products, and Performance and Essential Materials, which we refer to as PEM, or Materials. Today's conference call will begin with Jean-Marc, who will open with a few comments regarding Westlake's performance.
Mark Steven Bender will then discuss our financial and operating results, after which Jean-Marc will add a few concluding comments and we will open the call up to questions.
During 2025, we wrote off inventory and accrued expenses totaling $495,000,000 related to the decision to shut one styrene and three core vinyl facilities in North America and our epoxy facility in Pernice, Netherlands in PEM. We also recognized $16,000,000 of accrued expenses within our HIP footprint optimization actions and the sale of a compounding business. We refer to these expense items, which in aggregate were $511,000,000, as the 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 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 SEC filings. We encourage you to learn more about these factors 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, 02/24/2026, and therefore, you are 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 webpage at westlake.com. I will now turn the call over to Jean-Marc Gilson. Jean-Marc?
Jean-Marc Gilson: Thank you, Jeff, and good morning, everyone. We appreciate you joining us to discuss our fourth quarter and full year 2025 results. Our fourth quarter EBITDA of $196,000,000 is net of $511,000,000 of identified items that reflect our announced plan to restructure the businesses and reset our cost position to address the persistent macroeconomic challenges and volatility in trade policies we are experiencing. Despite continued industry pressures, we have taken decisive action to strengthen our global manufacturing footprint and we will continue to deliver on our commercial commitments while executing our three pillar strategy which we expect to contribute $600,000,000 of growth earnings improvement in 2026 while maintaining a focus on our long-term strategy of value creation.
Westlake's cost saving measures gained significant traction across every business in 2025, and we delivered over $170,000,000 of structural cost reductions. Looking at our fourth quarter results, HIP performed well while experiencing the typical seasonal decline in sales volume and earnings and the added impact of lower construction activity in the fourth quarter. The year-over-year decline in sales reflected lower new housing construction activity in North America, but that decline was partially offset by solid municipal pipe sales volumes as we benefit from the growth in infrastructure spending in cities across North America.
Turning to PEM, the fourth quarter was a continuation of the trends that we witnessed throughout 2025, with results reflecting a decline in volume and price with margin compressions across our product portfolio as we serve the stable global industrial and manufacturing base. As we discussed in December, global overcapacity in certain products created downward pressure on the sales price for many of PEM's products, leading to a sharp decline in PEM's profitability compared to historical levels. These pricing pressures continued in the fourth quarter with a further 5% decline in PEM's average sales prices compared to the 2025.
Our three pillar strategy, which I outlined in December, is expected to contribute a $600,000,000 improvement in earnings in 2026. Let me summarize each of these pillars as significant steps have already been taken to drive this earnings performance strategy forward. First, we have taken decisive actions to close higher cost PEM assets that largely sold products into low priced export markets. We closed an epoxy manufacturing site in Pernice, The Netherlands, a non-integrated PVC plant in China, three North American chlorovinyl assets, a styrene asset, and three HIP fabrication sites. These actions contributed to a 6% reduction in our headcount and an even more significant reduction in our contractor workforce in 2025.
Having now shuttered all of these assets, we expect to see an improvement in earnings of $200,000,000 in 2026 from footprint optimization.
Second, we have redoubled our efforts to address reliability in plant operation. Thus, we expect to deliver a $200,000,000 year-over-year EBITDA improvement from better plant reliability in 2026. Third, building on the successful structural cost reduction efforts achieved in 2025, we have implemented an additional structural company-wide cost reduction program that we expect will deliver $200,000,000 in 2026. These decisive steps and the commitment to deliver improved financial performance through these self-help actions will deliver better utilized assets and an improved cost structure to compete in a global marketplace.
I would like now to turn our call over to Mark Steven Bender to provide more detail on our financial results for the fourth quarter and full year of 2025. But before I do that, I would like to make an additional comment. As you may have seen in the 8-K we issued yesterday, our colleague, and long serving Chief Financial Officer, Mark Steven Bender, has informed us that he plans to retire later this year once his replacement has been appointed and appropriate transition has occurred. We are tremendously grateful for the countless contribution that Steve has made to the company over the years.
He joined Westlake in 2005, not long after the company's 2004 initial public offering, and he has been instrumental to the significant growth in the company that the company enjoyed since then. Steve will be with me on several more earnings calls in 2026 so this is not yet a goodbye. Nonetheless, we wanted to take this moment to express our gratitude to Steve. Now let's turn to the fourth quarter and full year 2025 financial results. Steve?
Mark Steven Bender: Thank you, Jean-Marc, for those comments. Thank you very much, and good morning, everyone. As a reminder, my comments regarding income from operations, EBITDA, net income, and earnings per share all exclude the financial impact of the identified items. Westlake reported a net loss of $33,000,000 or a loss of $0.25 per share in the fourth quarter on sales of $2,500,000,000. The net loss in the fourth quarter of 2025 was $5,000,000 lower than the prior-year period, primarily due to lower average sales prices and lower sales volumes.
For 2025, our utilization of the FIFO method of accounting resulted in an unfavorable pretax impact of $2,000,000 compared to what earnings would have been if we reported on the LIFO method. This is only an estimate and has not been audited. We delivered an additional $60,000,000 of cost reductions in the fourth quarter, thereby achieving the $170,000,000 of total cost reductions in 2025 and accomplishing our 2025 target of structural cost reductions.
For the full year of 2025, we reported a net loss of $116,000,000 and EBITDA of $1,100,000,000. Compared to our 2024 results, 2025 sales of $11,200,000,000 declined 8%. The lower full year 2025 sales were the result of a 5% decline in sales volume, driven primarily by PVC resin and epoxy resin, and a 3% decline in average sales price driven primarily by pipe and fittings, and PVC resin. We are pleased with the stability and resiliency of the portfolio businesses that we've assembled. At the same time, as we discussed in December, our PEM segment was impacted by global overcapacity, particularly in polyethylene and the core vinyls chain, that drove lower average sales prices and margins.
As Jean-Marc discussed, throughout 2025, we took the necessary actions to adjust to the changing global balance of supply and demand and to position our PEM segment for improved profitability in 2026 and beyond.
Moving to the specifics of our segment performance, HIP sales in the fourth quarter declined 8% year over year driven by a decrease in sales volumes. The sales volume decline was mostly driven by PVC compounds and exterior building products, which were most exposed to lower residential construction activity and was only partially offset by the continued solid sales volume in pipe and fittings. HIP's EBITDA margin in the fourth quarter of 2025 was below the prior year period due to unfavorable changes in sales mix and some higher cost. Shifting focus to HIP's full year 2025 results, EBITDA of $839,000,000 and EBITDA margin of 20% were in line with our guidance and expectations.
While HIP's 2025 sales and EBITDA were below the prior year, we are pleased with its ability to manage the slower new residential construction environment better than the overall industry due to its broad footprint and deep product offering that make it a supplier of choice for many large national homebuilders. HIP's resilient sales and EBITDA in 2025 were also supported by strong customer adoption of our innovative PVCO pipe as well as continued solid demand growth for municipal pipe in general.
Moving to PEM segment, fourth quarter EBITDA of $45,000,000 decreased by $45,000,000 sequentially. The sequential decrease in EBITDA was the result of 5% lower average sales price driven primarily by polyethylene and PVC resin and a 2% lower sales volume due to seasonal customer inventory destocking, which was partially offset by a $27,000,000 benefit from annuitizing certain pension obligations among other small one-time items. PEM's fourth quarter EBITDA margin of 3% declined from 5% in the prior quarter, driven by lower average sales price and sequential lower planned utilization, which was partially offset by a $26,000,000 benefit from fewer turnarounds and unplanned outages.
Shifting focus to PEM's full year 2025 results, EBITDA of $267,000,000 was lower than 2024 due to higher feedstock and energy cost, an elevated level of planned and unplanned outages, and lower global sales price. Weak global industrial manufacturing activity combined with overseas capacity additions created global overcapacity in certain materials in 2025. This global overcapacity drove lower average sales prices and margins in PEM, particularly for polyethylene and for alkali, and for vinyls. In response, we made the necessary decision in December to close three of our non-integrated and higher cost North American core vinyl assets that sold into low priced export markets.
As we discussed in December, we expect these actions to provide an annual EBITDA benefit for PEM of approximately $100,000,000 starting in 2026 by reducing our exposure to the low priced export market.
Turning to the balance sheet and cash flows, as of 12/31/2025, cash and securities were $2,900,000,000 and total debt was $5,600,000,000. Our balance sheet continues to be well positioned with a sixteen-year average debt maturity life. For 2025, net cash provided by operating activities was $225,000,000 while CapEx expenditures were $241,000,000. For the full year of 2025, we returned $335,000,000 to shareholders in the form of dividends and share repurchases. We continue to look for opportunities to strategically deploy our balance sheet in order to continue to create long-term value for our shareholders.
Turning our attention to 2026, let me address some of your modeling questions and provide some guidance for the year ahead. Our three pillar strategy, which was outlined in December, is expected to contribute $600,000,000 of improvement in earnings in 2026. Through these self-help structural actions, we are better positioned to serve our valued customers and navigate the current macro environment. We have revamped our operating model and now have better utilized data and a lower cost structure to compete in the global marketplace with improved financial performance.
Now turning to our guidance for HIP. Housing and industry consultants and a consensus of economists forecast housing starts to range between 1.3 and 1.4 million in 2026 and for home affordability based on lower interest rates to improve. Furthermore, we expect HIP to benefit in 2026 from the recent acquisition of ACI, with a now expanded compound product offering and strong customer relationships, the strong 2026 structural savings that we have initiated, and the benefits from plant optimization actions taken in 2025. Thus, based on our current view of demand and prices, we expect 2026 revenue in our HIP segment to be between $4,400,000,000 and $4,600,000,000 with an EBITDA margin of 19% to 21%.
For 2026, we expect a $100,000,000 year-over-year reduction in our capital expenditures to approximately $900,000,000, similar to our depreciation run rate. For the full year of 2026, we expect our effective tax rate to be approximately 17%. We also expect cash interest expense to be approximately $215,000,000. Jean-Marc? Now I would like to turn the call over to Jean-Marc to provide the current outlook of our business.
Jean-Marc Gilson: Thank you, Steve. 2026 represents an inflection point. Following the actions we have taken to optimize our manufacturing footprint, streamline our cost position, and operate our assets to serve our customers, we have positioned Westlake for a stronger, more resilient, and profitable future as we navigate the challenging macroenvironment with our three pillar action plan, together with our long-term strategy and our investment discipline. Turning to our outlook for demand, we expect a rebound from the seasonal lows of the fourth quarter. We are also seeing signs of improvement in global industrial and manufacturing activity to start the year. The January U.S.
ISM reading of 53 was the first month in expansionary territory in a year, and the average thirty-year mortgage rate sits at 6.2% today, down from 7% a year ago, which improved the affordability of new houses. So overall, some signs of improvement in the market, which has us cautiously optimistic that we will see sales volume growth in each of our segments in 2026.
Sustainability and environmental stewardship remain critical to our mission at Westlake. Having established a target to reduce our carbon emissions intensity by 20% by the year 2030, I am happy to report that in November, we released our 2024 sustainability report which showed that we achieved our emissions reduction goal six years early. Before I open the call to your questions, I want to close by highlighting Westlake's foundational strengths which continue to serve us well. These strengths include a diversified and complementary portfolio of businesses, our vertically integrated business model, our globally advantaged feedstock and energy position in the U.S., and our investment grade rated balance sheet with $2,900,000,000 of cash and securities.
We have streamlined our operating model and have reset our cost structure. As we navigate the cycle in PEM, we have a more competitive business that is positioned to grow more efficiently with our customers. The expected steady improvement in housing construction will provide HIP the ability to continue to capitalize on its very broad and deep product offering to grow our business and to create value for our shareholders. We remain focused on execution, cost discipline, and value-driven growth. Thank you very much for listening to our earnings call. I will now turn the call over to Jeff.
Operator: Thank you, Jean-Marc. Before we begin taking questions, I would 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 will provide that information again at the end of the call. Amber, we will now take questions.
Operator: Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from David L. Begleiter of Deutsche Bank. Your line is open.
David L. Begleiter: Thank you. Good morning. Jean-Marc and Steve, can you go back to the HIP business in Q4 and break down the beat versus what you announced back in mid-December of roughly $90,000,000? Thank you.
Mark Steven Bender: Yes. So David, thank you very much for the question. And as you could see, when we compare the results in PEM quarter over quarter, we did identify specifically some annuitization of some pension benefits. You can see that we also shuttered some of these assets in the fourth quarter. And so the three core vinyl plants had actually been down during the entire fourth quarter. So the losses that we saw accruing during the period no longer were accruing. So when I think about this, we had a volume reduction of only about 2% and a price reduction really in PVC and in polyethylene.
So the beat was really attributable to beginning to take the proactive steps in our three pillar initiative by removing the losses that we saw accruing from those sales in that low priced market and beginning to take some of those cost reduction initiatives at the tail end of 2025.
David L. Begleiter: Very clear. And just on polyethylene February, what are your expectations around your announced price increases and potential realization? Thank you.
Mark Steven Bender: Well, as we think about 2026, we have seen some improvement in demand and some improvement in price action. But remember, we had some adjustments at the end of the year of 2025. And so the announced increase in polyethylene price that we saw in January of about $0.05 really begins to offset some of the market adjustment at the end of last year. And we have made further announcements in price actions for February. We will see how February plays through, but we have another price announcement also on the table for February.
David L. Begleiter: Thank you.
Operator: Our next question comes from Patrick David Cunningham of Citi. Your line is open.
Patrick David Cunningham: Hi. Good morning. I am curious on your outlook for chlorovinyls and PVC chain in 2026. It seems maybe cautiously optimistic with some demand pull through into the HIP business, but still dealing with some structural supply issues. So how would you frame the supply and demand outlook? And sort of direction for price and margin in 2026?
Mark Steven Bender: Well, I think, Patrick, as you look at the price action that we have seen so far, it is indicative of some restocking that is going on. I would say that we remain cautiously optimistic. We have seen some price action. In PVC resin, we have seen some improvement in price. But we are still not fully recovered from the end of the year price adjustments that we saw in PVC. So we have seen announcements also in February, and we have also noticed that inventory is restocking by some of our customers.
But I would say we are still very cautious in terms of how we look through the year because I do not have that longer-term availability of visibility. I can only see out several months. But I think the early signs that we see in pricing initiatives in PVC and in caustic signal that we see some improvement in restocking, but it is hard to know whether this will play through the entire quarter and for that matter the entire year. I would also note that with the actions that we have seen in terms of the export market, export market prices have started to trend higher.
And I think that is attributable to some of the reduction of duty drawback that certain markets like China are providing. It is going into effect in April, but the actions taken already suggest that prices have moved up in export market pricing.
Patrick David Cunningham: Understood. Very helpful. And then maybe just some clarification on the HIP guidance. I am assuming that includes three quarters of ACI with a slightly lower margin guide. Is the bulk of that coming from the dilutive margin impact there? Or are there any other mix impacts we should be monitoring?
Mark Steven Bender: No. It is really not an impact of ACI, and we closed that in January. And so I do expect that it will be a contributor all year long. But I would say, Patrick, it is really looking at the numbers that we have guided to—1.3 to 1.4 million starts in 2026, similar to 2025—and just recognizing that as we work through the starts numbers this year that product mix can have an impact in the overall margin that we see in the HIP overall business, but we still remain cautiously optimistic about the contributions that HIP will make this year in 2026.
Operator: Thank you. One moment for our next question. Our next question comes from Patrick Duffy Fischer of Goldman Sachs. Your line is open.
Patrick Duffy Fischer: First question just on the $600,000,000 of cost help this year. How does that play through the year? If you could kind of walk quarter by quarter, how do we add up to that number for the year?
Mark Steven Bender: Yeah. Good question, Duffy. And I would say that as we have taken the actions in 2025, some of these savings that we achieved in 2025 were attributable to the actions that we took in 2025 and those will continue to play through for the year through 2026. And so those actions that we have taken cover things such as logistics, procurement, a variety of other initiatives to really drive reductions in cost, which we think will be structural in nature. So we think that as we think about the ratable benefit that we expect to see, we do expect to see that ratable benefit of cost reductions to play through the year.
Of course, we have shuttered those assets at the end of the year for that second pillar. And so certainly those operations are down, no longer exposing us as heavily to that low priced export market. So I do expect those also to be coming through the course of 2026. The third pillar is reliability. And, of course, we have to earn that each and every day. But we are very confident we have made significant investments in our plants, significant training of our people. 2024-2025 were years of very elevated levels of planned turnarounds. And therefore, associated with some of those planned turnarounds were the unplanned outages as we brought those plants up or attempted to.
2026 will be a year with far fewer planned turnarounds, so we do have a high expectation that we will be able to deliver on that third pillar of reliability.
Patrick Duffy Fischer: Fair enough. And then at the midpoint of your HIP guidance, you are basically $60,000,000 better on EBITDA than you were last year. Again, does that portend for kind of each quarter? Are there still some quarters where you may be down year over year even if you hit the midpoint, or maybe first half, second half, just to kind of help us get the shape for the HIP earnings this year?
Mark Steven Bender: Yes. And Duffy, good question. The fourth quarter and the first quarter of each year tend to be weaker quarters just seasonally. Those who are in the Midwest or Northeast have seen the heavy snowfall in the winter season play through. And so as we think about it, it slows down demand and the construction activities. The fourth quarter and the first quarter of each year tend to be a slower period of activity. But nevertheless, quarter two and quarter three tend to be much stronger. So that same cycle that we saw play through in 2025 should be similar in terms of the shape of the curve in 2026.
So we do expect, again, a cautiously optimistic outlook for HIP and the guidance we have for starts is similar to those in 2025.
Frank Joseph Mitsch: Perfect. Thank you, guys.
Mark Steven Bender: You're welcome.
Operator: Our next question comes from Joshua David Spector of UBS. Your line is open.
Joshua David Spector: Yeah. Hi. Good morning. I wanted to just ask on HIP where you guys continue to talk about relatively strong growth in the infrastructure segment around pipe and fittings. But the infrastructure sub-segment sales are actually down more than the housing products segment, both year on year and sequentially. So does that mean that the composites business is down much more, or what am I missing between that more positive commentary and the segment results?
Mark Steven Bender: Good question. And the answer is that a lot of that municipal pipe actually goes into neighborhoods and subdivisions, which actually are not in that subsegment. And so there are sales not only to cities and counties and states, but also into major developers who may be developing those neighborhoods and those subdivisions with infrastructure pipe and fittings. And so it is really a mix between those two subsegments within the HIP segment. We are seeing really continued strong growth in the volume in that side of the business.
And so when I think of and speak to municipal pipe, it is not always necessarily in the infrastructure subsegment because some of that is in the housing subsegment related to nationwide builders who are building out infrastructure in their neighborhoods and subdivisions.
Joshua David Spector: Okay. Thanks. That is helpful. And maybe actually a similar point to what Duffy was asking. If I look at the cost savings, is any of that being attributed to HIP? So if EBITDA is up $60,000,000 at the midpoint and you are doing an acquisition, is the organic up? Is there cost savings? Is there something else we are missing in the moving parts there?
Mark Steven Bender: Yes. As we think about the pillar that we talked about of cost reduction, yes, the HIP side of the business does have a meaningful contribution in that cost savings initiative. And so as we look forward, they and all the other functions are also contributing. So there is a meaningful contribution in that pillar that HIP is making. So I do expect them to continue to make those contributions in 2026.
Joshua David Spector: Okay. Thank you.
Operator: Thank you. Our next question comes from Frank Joseph Mitsch of Fermium Research LLC. Your line is open.
Frank Joseph Mitsch: Thank you, and let me echo Jean-Marc's appreciation for your job, Steve. It has been a pleasure working with you. Of course, we will work with you, I guess, on another one or two calls. Steve, in 2025, Westlake registered negative free cash flow. I was wondering what your expectations are in terms of free cash flow for 2026.
Mark Steven Bender: Good question, Frank. And our objective really is to generate strong results to drive strong cash flows. But as you can see, a lot of the self-help that we have with these three pillars is really focused and the predominance really is on the PEM side of the business. And you can see that our capital expenditure plan for 2026 is also $100,000,000 lower than we had in 2025. So our real focus is to drive free cash flow for the entire business as we go forward.
And so while we have no real visibility beyond the next several months, from our order book, I would say our real objective really is to drive real cost savings, improvement in reliability, and really make this business a cash flow positive generating business. But as you know, we do not give direct guidance on a lot of those metrics. But that is clearly our objective.
Frank Joseph Mitsch: Okay. Terrific. And I was wondering if you guys could opine on the news the other day, you know, following the Supreme Court decision on tariffs, the administration on several items came out and said it was looking at putting emergency tariffs including plastic pipes. So I am curious if you could offer some comments there as to the necessity and what expectations you might have in terms of tariff benefits, etcetera?
Mark Steven Bender: Yeah. Frank, good question again. And I would say that our materials are all subject to the USMCA rule guidelines. And so therefore the impact to tariffs has really been de minimis, really immaterial.
Frank Joseph Mitsch: Okay. Great. But the fact that they called out plastic pipes among, I think, six or seven items, is there something going on there where the domestic plastic pipe industry needs tariff protection?
Mark Steven Bender: Frank, I would say that what we have seen all throughout the course of 2025 and, frankly, in the previous administration is that the current administration has really used the USMCA treaty as a way to make sure that those items that were embodied in that treaty are not hit with additional tariffs. So that is our expectation.
Frank Joseph Mitsch: Okay. Alright. Thank you so much.
Mark Steven Bender: Thank you.
Operator: Our next question is from John Roberts of Mizuho. Your line is open.
John Roberts: Thanks, and thanks as well, Steve, and welcome Bob Patel to the board. OxyChem is a large competitor. Do you see any changes in how they compete after the change in ownership a couple months ago?
Mark Steven Bender: We have not at this stage.
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John Roberts: Okay. And then your competitor cited weakness in domestic merchant chlorine. Did you see that weakness as well? And what is the near-term outlook for domestic merchant chlorine?
Mark Steven Bender: Yeah. As you know, we are a much smaller producer of domestic chlorine now with some of the actions that we have taken in December. But as we think about it, our view is that the weakness in chlorine is really attributable to some of the weakness that we have seen in the vinyl side of the business. And, of course, in the first quarter and the fourth quarter of the year, we also have a reduction in demand for water treatment and some of the precursors going into refrigerants. And so all of those speak to kind of the lesser pull on chlorine, whether it is construction materials, water treatment, or precursors to refrigerants.
And so it does not surprise that there is a slowdown in demand in fourth quarter and first quarter for those kind of materials.
Operator: Thank you. Our next question comes from Jeffrey Zekauskas of JPMorgan.
Jeffrey Zekauskas: Thanks very much. You talked about $600,000,000 in benefits from plant reliability, cost reduction, footprint changes, but I was wondering, what is the EBITDA base that these benefits should come from? So last year, your EBITDA was $1.14 billion. Should a rational agent add $600,000,000 to the $1.14 billion and get, I do not know, $1.74 billion? Or because business deteriorated through the course of 2025, the EBITDA base is lower that the $600,000,000 in costs should be added to. Could you give us an idea of how to put the two numbers together?
Mark Steven Bender: Yeah. And so, Jeff, as you think about it, the actions that we have taken in December impacted four of the North American plants. And frankly, the full shuttering of the Pernice facility was not completed until really the very tail end of 2025. And so when you think about the contributions of that first pillar of site optimization, we really get that full benefit starting in 2026. In terms of the cost initiatives, yes, we achieved $170,000,000 of cost reductions that were structural in nature, but the guidance we have continued to provide for 2026 is an additional $200,000,000 on top of those achieved in 2025.
And of course, the reliability issues, as I mentioned earlier, again, 2025 was an incredibly busy year of planned outages, a number of unplanned outages around those outages as well. And given that our plan for 2026 is far fewer planned turnaround activity or maintenance activities, I do expect that we will see those benefits accrue in this year as well. So back to your question, I think that you could think of a starting point when we took those actions at the plants as a way to build that math.
Jeffrey Zekauskas: Okay. And when you think about your opportunities in PVC volume in 2026, do you think you will grow more in the export market or more in the domestic market? Do you think the growth rates will be comparable? How do you assess volume opportunities in PVC for 2026?
Mark Steven Bender: And so, Jeff, when you think about the vinyl demand, it is really going into largely building products of one sort or the other, whether it is in pipe and fitting, siding, trim, and other applications. That is closer to 65% of your overall vinyl resin demand. And so as you could see, our outlook for HIP is reflective really of a year of construction activities similar to 2025. We have seen a really thin level of inventories being carried by our customers all throughout 2025 because prices continued to trend lower.
And the restocking that we have seen in the first part of this year is reflective of some of the demand pull that we have seen in a rebuilding of those inventories and being able to nominate prices in vinyl. So as we look forward, we are again cautiously optimistic as we see the demand pull on PVC resin going into the construction materials and some of the other compounded materials that we sell through our compounds businesses.
Jeffrey Zekauskas: Okay. Can you comment on the opportunities in PEM and PVC?
Mark Steven Bender: Yeah. In PEM, again, we are selling a significant portion of our resin into our own HIP segment. And certainly, given our lower cost structure that we have achieved through these rationalization actions that we have taken in the plants and through our cost reductions, we think we have a much better cost structure and will certainly be looking to initiate sales initiatives with many of those customers going forward domestically. Given the fact that we pulled back from exports through those actions that we took in December, I do expect our exposure to export volumes will be greatly diminished.
Jeffrey Zekauskas: Thank you very much.
Operator: Our next question comes from Hassan Ijaz Ahmed of Alembic Global Advisors.
Hassan Ijaz Ahmed: Good morning, Steve and team. Steve, I know a bit premature, but great working with you over the years, and wishing you all the best for your retirement.
Mark Steven Bender: Thank you very much.
Hassan Ijaz Ahmed: Now a quick question around HIP segment's EBITDA guidance, but just wanted to switch over to the sales guidance. I know you are talking about a return to sort of more normalized longer term sales growth in 2026, so 5% to 7%, even though, if I heard you correctly, you are assuming similar housing starts in 2026 to 2025. But, flipping through the presentation, it seems a chunk of that growth you are expecting is coming from the ACI acquisition as well as product innovations. So I am just trying to understand the significance of both those innovations as well as the ACI contribution to that growth.
Mark Steven Bender: Yeah. I do expect that ACI will be a very nice contributor. It brings a broader portfolio offering rather than just adding to our existing PVC portfolio that we had; it brings an expanded portfolio in silicone and cross-linked polyethylene to be a nice contributor. But I would also say the innovations that we have seen in products such as our PVCO plant, which will be starting up at the end of this year, such as other product innovations in our Westlake Royal exterior businesses, we think will continue to be a nice driver in not only the revenue growth, but also margin growth.
So this product innovation is certainly a huge element within the HIP side of the business and continues to have us be selected as supplier of choice by many of the nationwide builders. So that long-term guidance that you highlighted is very much as we see it still on track.
Hassan Ijaz Ahmed: Understood. Very helpful. And as a follow-up, I know you guys have been busy sort of optimizing the footprint and the like. And obviously, $200,000,000 of incremental EBITDA coming from that. But if we step back a second and you guys take a look at the broader portfolio, I mean, obviously, you are getting deeper and deeper into building products. And, as you take a look at the ethylene/polyethylene side, it seems fairly oversupplied. If rationalization does not happen, it will remain that way for a while. So I am just trying to understand, from a portfolio perspective, do you still see a role for that part of the portfolio? Or would you potentially consider divesting that at some stage?
Mark Steven Bender: Well, again, our focus is to really be focused on value creation. And so as I think about opportunity sets in both the PEM side and the HIP side, the answer is we will deploy capital where we see the strongest value creation. The fact that we have continued to underbuild in North America means that the opportunities to deploy capital on the HIP side of the business probably have the nearest-term return potential. But that does not mean that we would not invest in a valued opportunity on the PEM side of the business. It really is just where is the best investment opportunity for that dollar, be it in HIP or in PEM.
Our focus remains very much value oriented and driving long-term value creation. And if that takes us into PEM or into HIP, and we see that opportunity, that is where the funds will be deployed. But given where we are in the various business cycles, I would say the predominance of the opportunities near-term would probably be in HIP. That does not mean there could not be some opportunities on the PEM side. In other words, we continue to watch both.
Hassan Ijaz Ahmed: Very helpful. Thank you so much.
Operator: Our next question comes from Aleksey V. Yefremov of KeyBanc Capital Markets. Your line is now open.
Aleksey V. Yefremov: Thanks. Good morning, guys. This is Ryan on for Alexi. I just wanted to ask the first question. In the deck, you mentioned competitive market pressures in pipe and fitting. So I was just curious if maybe you could provide some more color there. And how much was pricing down for pipe and fittings versus the broader HIP segment with flat pricing year on year?
Mark Steven Bender: Yes. As we think about the pipes and fittings business, it remains a very good business. But certainly with some of the slowdown in construction activity, we have continued to make inroads from a volume perspective but naturally, with some of the pressures on affordability and the slowdown in construction activity, there is going to have to be some pressure on pricing. But we do believe that we are at a point where our product innovation, and I have mentioned PVCO earlier, allows us to really continue to penetrate that market with innovative products, which bring really solid margins to the business.
While there is always the ebb and flow in each region across the country in terms of volume and pricing, so it is hard to give you a direct pricing number because it varies by region across the country, I would say that the innovative products that we are bringing forth specifically in our pipes and fittings business continue to drive long-term good value there. And I just want to remind you that we are really the only player in the U.S. markets that provides both the integrated solution of fittings and pipes and I would add engineering. So we are able to sit down with a customer and we can engineer the project for you.
We can deliver the pipe and deliver the fitting. So there is an integrated value of providing the service as well as the products to provide an integrated solution to a customer. And I would say that we continue to see real good innovation in that business and I expect to see future PVC continuing to be built and grow that market space.
Aleksey V. Yefremov: Okay. I appreciate the comprehensive answer there, Steve. And just the last one for me, maybe can you just give us your thoughts on caustic soda? How do you feel about market balance and pricing over the next couple months?
Mark Steven Bender: You know, caustic is a market where we have begun to see some price traction. We announced pricing initiatives of $75 a ton back in December and have had a second price initiative of $65 a ton that was announced just last month. And so we are seeing some ability to get traction on those price announcements. And so when you think of our two announcements that total $140 a ton, we do expect that we will achieve some of that. And that is really coming from some of the industrial and manufacturing demand that we saw at the very tail end of the year and early this year so far.
Operator: Thank you. Our next question comes from Matthew DeYoe of Bank of America. Your line is now open.
Matthew DeYoe: Thanks. Steve, I guess just to follow-up on that. You mentioned earlier you were seeing some signs of an industrial recovery. Is Westlake seeing something specifically in its order books? Or is this just the read on PMIs?
Mark Steven Bender: Well, it is both. When you think about the PMI, it certainly is a positive signal. We would like to see more of those positive signals play through, but I would also say the volumes that we are seeing in some of the infrastructure business that we mentioned earlier continue to be constructive as we go forward. It is still early in the first quarter. As I mentioned, the first quarter is typically a slower demand period. So we want to take a look and see how the rest of the year plays through. So as I say, we are cautiously optimistic, but there is a constructive view here as we look forward into 2026.
Matthew DeYoe: Okay. And just to kind of follow-up on Dave's question a bit. Maybe it is blunt, but the street was walked down in the fourth quarter on account of the unabsorbed fixed costs from the assets that were eventually closed. Clearly, we saw a lot of those charges hit GAAP income. So is the outperformance on an adjusted basis just saving money faster once the assets were closed? Or is it just some creative adjusting on the unabsorbed fixed costs?
Mark Steven Bender: I will answer the first part of your question, and I would say what you are really seeing is the impact of taking the actions that we announced in December and really taking the steps to reduce our cost and shutter assets that were not creating real value. So that is really what you begin to see play through in fourth quarter. And as we think about our three pillared strategy, this is why we have the confidence that we can deliver on that three pillared strategy.
Matthew DeYoe: Is it fair to say then that if you are seeing this faster in Q4 that the tailwind for 2026 is less than $600,000,000 all else equal because now you are going to be comping some savings in Q4?
Mark Steven Bender: No. I think the guidance that we provided was to achieve that $600,000,000 in those three pillars throughout 2026. And so as you see that we took actions in 2025 related to cost and optimizing our footprint, I think we are still very comfortable that $600,000,000 is going to get fully contributed over the course of the year.
Operator: Our next question comes from Arun Viswanathan of RBC Capital Markets. Your line is now open.
Arun Viswanathan: Great. Thanks for taking my question, and I will echo all the other comments. Steve, great work with you over the last several years. Good luck in your retirement, and we will be speaking again soon, obviously. But just wanted to follow-up on that same line of questioning here. So if we take your HIP guidance, that implies around $900,000,000 of EBITDA at the midpoint if you say 20% margins on $4,500,000,000 of sales, and then your PEM guidance can be interpreted to be the $267,000,000 that you did in 2025 plus maybe $600,000,000 of increase. So that would be $1,750,000,000 maybe at the midpoint. What would you call out as decrements to that or maybe other positive drivers?
Are we missing anything else, or are those the most important components? Thanks.
Mark Steven Bender: As Jean-Marc noted, the $600,000,000 is a gross number. So there will be some cost to achieve some of those initiatives that we have outlined here. But again, setting the market conditions aside because none of this is factoring in the market conditions—this is just really focused on the self-help initiatives of these three pillars. As we look forward into 2026, we will take the market conditions as they come, but we will be very focused on delivering these actions that we have outlined here in this three pillared strategy. There will be some cost to achieve that $600,000,000 savings in each one of those three pillars, but we think that we have got a good effort underway.
We recognize for reliability, we have to earn that each and every day. But the actions to rationalize the footprint we have already taken, and initiatives to negotiate reduced costs, will continue throughout the rest of the year. As you would imagine, we are not just going to rest on those actions that we have taken in 2025. We will continue to look for other opportunities to reduce our costs throughout the rest of this year above and beyond those we have outlined already.
Arun Viswanathan: Okay. Thanks. And understanding you just completed an acquisition here, what else needs to be done from your portfolio standpoint? Would you be looking to integrate further downstream in building products, continue to grow out that business, or do you feel like your position now is quite set? What else are you looking at from an M&A standpoint? Thanks.
Mark Steven Bender: Starting with the HIP side of the business, improving the portfolio depth and breadth is certainly a focus that we always have. ACI is a good example of adding both the geographical position as well as product breadth. We think about the other components of our HIP business—adding further depth and breadth is certainly something that we have talked about, and I mentioned innovation is a huge piece of our focus. That can come from both organic or inorganic growth opportunities. On the PEM side, we continue to look for ways where we can improve our positioning.
There are still opportunities to further integrate the business and improve the logistics related to those businesses that improve the overall profitability by cost reductions. So there are efforts both on the HIP side as well as on the PEM side to improve the integrated model that we have, integrated not only from a product set, but also from a managing cost perspective. It is really focused on both sides of the business to be able to integrate and run the business smoothly, effectively, and cost effectively.
Arun Viswanathan: Great. Thanks a lot. I will turn it over.
Operator: Our next question comes from Peter Osterland of Truist Securities. Your line is open.
Peter Osterland: Hey. Good morning. Thanks for taking the questions. I just wanted to start by following up on the profitability improvement plan. From the actions you have already announced and that are embedded in that $600,000,000 of improvement this year, is there some amount that you would expect to be realized on a year-over-year basis in 2027? And could you size that?
Mark Steven Bender: Yes. As you think about the initiatives that we have taken in 2025—$170,000,000—those were structural in nature. The 2026 target is an additional $200,000,000. So we do expect, since these are structural benefits, to continue to have that carry through into 2027. As I mentioned earlier, we are continuing to look for areas where we can continue to find ways to reduce our cost. These can be in the manufacturing area, support area, logistics, and procurement. As we think about those, we will continue to then enunciate those as we go forward over the course of 2026. But those changes that we have already announced are structural in nature, and I expect them to carry forward into future years.
Peter Osterland: Okay. Great. And then, on cash flow, do you expect free cash flow to be positive in 2026? And what are some of the major drivers aside from earnings growth to be aware of? Could you highlight your working capital expectations or any nonrecurring cash costs associated with asset closures this year?
Mark Steven Bender: Yes. As we think about 2026, working capital is always an issue that we need to keep our eye on. Some price initiatives can certainly have an impact on working capital. So as we think about the overall cash generation of the business, our CapEx program guidance for 2026 is $900,000,000. We will keep a close eye on working capital and CapEx because we clearly recognize that generating free cash flow is critically important to our stakeholders. That is always a strong objective as we go through any year, including this year. That will be our objective and a big focus.
Operator: Our next question comes from Matthew Blair of TPH. Your line is now open.
Matthew Blair: Hey, Steve. Congrats on your retirement. It has been great working with you over the years here. I want to circle back to your comments on the removal of the VAT rebate in China, which I think is scheduled for April 1. I think China's PVC exports are nearly 10% of the global PVC market, and if you think that PVC is roughly breakeven in China, the rebate is 13%, it seems like this could be a pretty meaningful impact on the market, meaningfully reduce export volumes coming out of China. Does that make sense to you too? Do you agree with that? And is there anything else that you would add there?
Mark Steven Bender: Yeah. It is a good question. And I was just looking at some statistics this morning. China represents about 15% or so of global PVC capacity and somewhere similar in caustic capacity, but they are not exporting that much—not the 15% that I just mentioned. They are exporting much less than that as a percentage of their total domestic production. But the focus that they have initiated on removing, effective April 1, that VAT drawback or that duty drawback is about a 13% impact in overall pricing. We have actually seen the benefits of that announcement play through in export pricing already. It is targeted in PVC.
And so we have already seen export prices in PVC begin to rise because of the expectation that duty drawback will not be available to them going forward. So I think it is an indication by the authorities in China that they really need to find actions to rationalize some of those exports that are being disruptive to the market, both internationally and domestically.
Matthew Blair: Great. Thank you. And then the incremental $200,000,000 of cost reductions in 2026, I just want to clarify. Does that all stem from the asset closures that you already did in 2025? Or will there be incremental cost reduction efforts as you progress through 2026?
Mark Steven Bender: Yeah. These are incremental above and beyond the actions taken in December or earlier in the year in 2025. These include initiatives in the manufacturing arena, initiatives in logistics, procurement—domestically as well as internationally—that add up to well over 50% of the $200,000,000 that we have talked about in cost reduction initiatives. So these are not solely tied to those footprint optimization initiatives.
Operator: Our next question comes from Vincent Stephen Andrews of Morgan Stanley. Your line is now open.
Turner Hinrichs: Hi. Congrats, Steve. This is Turner on for Vincent. Since last year, consultants have been calling for pretty significant chlorine price declines this year, which I understand is driven largely by vinyls weakness. Has the situation evolved this year, perhaps due to the VAT export rebate elimination or perhaps something else on demand or orders? And could you provide color on how you see chlor-alkali and vinyls earnings trending this year?
Mark Steven Bender: It is a good question. And I would say that, as I mentioned earlier, given the demand pull that we are seeing in PVC going into construction activity, we see a similar year in 2026 to 2025. So the construction activity we see as being similar. So the demand pull is there. I would say though that given the indications we have seen in industrial and manufacturing demand for caustic, we have actually seen those numbers tick up. And that tick up in demand has driven re-inventorying, and that re-inventorying position has caused us to recognize that pricing has just gotten too low in caustic soda.
So as you could see, we have initiated two price initiatives: $75 a ton that we initiated in late December and then another in January of $65 a ton, a total of $140 a ton. We do think we will get some traction on that. On the chlorine front, again, we will have to see how the year plays through for vinyl demand. As we sit through fourth quarter and first quarter, as I mentioned earlier, the fourth quarter and first quarter tend to be weaker demand periods for chlorine, simply because of the slower construction season pulling less on chlorine, lesser demand in the precursors for refrigerants, and water treatment.
So no surprise that we would see some slowdown in pricing and demand in chlorine. But a lot is uncertain as we look forward into the year. I do not have the visibility I wish I had for the midyear or tail end of 2026. Our visibility is more limited than that. I would say that as we look forward, we see bright spots in pricing in caustic and bright spots in pricing in PVC. I do not want to extrapolate that until we see more of how 2026 will play through.
Turner Hinrichs: Thank you. That makes a lot of sense. Skipping over to the HIP segment, can you talk about some of the swing factors that could take us to the low end versus the high end of the 19% to 21% EBITDA margin guide? And any color on related drivers such as price, mix, or synergies?
Mark Steven Bender: I would say it is really going to be a function primarily of mix. We have seen a lot of discussion on affordability over the course of the last several years. To address affordability and be the producer of choice by many of the nationwide homebuilders, we have a good-better-best range of products, and each one of those ranges has a different margin associated with them. It is important that nevertheless we are picked because of the quality and the ability to deliver those products. Having that range of products matters. Being able to have that volume is very important. But a big swing could be simply product mix over the course of the year.
Operator: Our next question comes from Abigail Eberts of Wells Fargo. Looking at PEM, I am curious about your expectations for the cost side. If you look at what the consultants have, obviously, polyethylene pricing is looking to be higher on a more or less apples-to-apples basis in 2026. But on the flip side, integrated margins are looking like they might be down up to double digits. Is that around in line with what you are looking for? And also, for your February price increase, are you around $0.05 in line with your peers?
Mark Steven Bender: Certainly, as you know well, we are also a buyer of ethylene, and that ethylene goes into our production of PVC. We have seen elevated pricing in ethylene. Ethane has been pretty volatile over the last several months—run up in natural gas, and ethane has followed the run up—and also some pullback in pricing, but ethylene has remained pretty elevated. From a pricing perspective in polyethylene, we did see a recognition of $0.05 in January. But remember in December, we also saw some price adjustments in the December reset. We do have an announced increase in February of $0.05.
We will see how the marketplace does over the course of February and into March, but we have announced an additional increase in February.
Operator: Our last question comes from Kevin William McCarthy of Vertical Research Partners. Your line is now open.
Kevin William McCarthy: Yes. Thank you, and good morning. Steve, it has been a real pleasure over the last twenty one years. Wish you all the best. Most of my questions have been asked and answered, but maybe a couple to probe here. First, I wanted to ask you about asset utilization. If I look at slide four, your $200,000,000 of savings from footprint optimization, I think, was crafted before we saw the PMI and the incremental goodness in your order book.
So I guess my question would be if I look at it on an apples-to-apples basis, do you think what you are seeing now would support a contention that you would see an uplift in utilization, let us say, in chlorovinyls and polyolefins, irrespective of your rationalizations, that could help earnings more than the $200,000,000 would suggest?
Jean-Marc Gilson: Yes. Asset utilization has been a little bit uneven across the business last year. After the big turnaround in the ethylene/polyethylene chain, we saw really good performance in the second half of the year. With no turnaround in 2026 and maybe one in 2027 for LCC, we are expecting that our olefin business will continue to run at very high utilization rate. Last year, most of the issues were on the chlorovinyl side. Now the combination of better operating performance and the shutdown of assets, I think, will lead to a significant improvement in operating rates—rates that we think will be conducive, together with all the cost savings, to much better results in 2026.
Kevin William McCarthy: Thank you, Jean-Marc. And then, Steve, maybe a small question for you on the tax line. I think you guided to a 17% rate for 2026, which was a little bit lower than we might have guessed. Has your tax rate come down on a structural basis? And if so, what is driving that?
Mark Steven Bender: Yeah. Kevin, good question. And the answer is because of our operating performance in 2025, I have some net operating losses that I am able to utilize in 2026. So what you see in my effective tax rate of 17% is really overseas taxes—overseas international tax rates—and I am actually trying to utilize those NOLs generated in 2025 in 2026.
Kevin William McCarthy: I see. Okay. Thank you so much.
Operator: Thank you. At this time, the Q&A session has ended. I would like to turn it over to Jeff Holy for closing remarks.
Jeff Holy: Thanks, everyone, for participating in today's call. We hope you will join us again for our next conference call to discuss our first quarter 2026 results.
Operator: Thank you for your participation in today's Westlake Corporation Fourth Quarter and Full Year 2025 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's website. Goodbye.
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