Westlake Chemical Partners LP Announces First Quarter 2024 Results

Rhea-AI Summary

Westlake Chemical Partners LP (WLKP) reported net income of $14.8 million for Q1 2024, in-line with Q1 2023. Cash flows decreased to $104.6 million due to working capital changes. MLP distributable cash flow was $16.9 million, down $0.7 million from Q1 2023. Despite lower production and sales volume, net income saw a slight increase from Q4 2023. The quarterly distribution of $0.4714 per unit was declared, marking the 39th consecutive distribution. The partnership remains optimistic for 2024, citing stable demand for ethylene derivative products and favorable margins.

Positive

• Consistent performance in Q1 2024 compared to previous quarters.

• Optimistic outlook for 2024 due to stable demand and improved margins.

• 39th consecutive quarterly distribution declared, demonstrating consistency.

• Net income saw a slight increase from Q4 2023.

Negative

• Cash flows decreased in Q1 2024 due to less favorable working capital changes.

• MLP distributable cash flow decreased by $0.7 million compared to Q1 2023.

• Lower production and sales volume impacted MLP distributable cash flow and coverage ratio.

Insights

Financial Analyst

Westlake Chemical Partners LP's declaration of its 39th consecutive quarterly distribution demonstrates a commitment to returning value to shareholders. The unchanged distribution level despite a decrease in cash flows from operating activities suggests management's confidence in the business model and the stability provided by their ethylene supply agreements. However, the decrease in operating cash flow and MLP distributable cash flow could indicate underlying challenges in production and sales volume that merit monitoring. Moreover, the coverage ratio of less than one could raise concerns over the sustainability of such distributions if not improved. It's important for investors to consider the earnings stability that ethylene supply agreements provide, balanced against the performance trends and potential volatility in feedstock and energy costs.

Market Research Analyst

The chemical industry and particularly the market for ethylene and downstream derivatives, is largely influenced by global feedstock and energy prices. The stability of these costs, as indicated by the company, could bode well for margins in the short term. However, investors should be aware of the cyclical nature of the industry and potential impacts of global economic conditions on demand. It is noteworthy that Westlake's performance has been consistent, reinforcing the value of long-term supply agreements in providing cash flow predictability. Trends within the broader chemical sector, like a shift towards sustainability and circular economies, may also eventually impact Westlake's operations and investor sentiment.

Energy Sector Analyst

The optimization of feedstock and energy costs mentioned by Westlake Chemical Partners is important in the ethylene industry because it can directly influence profit margins. The company's proactive sales strategy in capitalizing on improved ethylene margins is commendable. With stable demand for downstream ethylene derivatives and a strategic supply agreement in place, the company appears to be positioned to manage the volatility inherent in the energy sector. However, the long-term implications of energy transition trends and potential shifts towards renewable sources could have an impact on the company's traditional feedstock-based operations.

• Declared quarterly distribution of $0.4714 per unit; 39^th consecutive quarterly distribution

HOUSTON--(BUSINESS WIRE)-- Westlake Chemical Partners LP (NYSE: WLKP) (the "Partnership") today reported net income attributable to the Partnership in the first quarter of 2024 of $14.8 million, or $0.42 per limited partner unit, which was in-line with first quarter 2023 net income of $14.9 million. Cash flows from operating activities in the first quarter of 2024 were $104.6 million, a decrease of $40.3 million compared to first quarter 2023 cash flows from operating activities of $144.9 million, due to less favorable working capital changes. For the three months ended March 31, 2024, MLP distributable cash flow was $16.9 million, a decrease of $0.7 million compared to first quarter 2023 MLP distributable cash flow of $17.6 million. The decrease in MLP distributable cash flow and associated trailing twelve-month coverage ratio was primarily due to lower production and sales volume.

First quarter 2024 net income attributable to the Partnership of $14.8 million increased by $0.5 million compared to fourth quarter 2023 net income of $14.3 million, in part due to lower selling, general and administrative expenses. First quarter 2024 cash flows from operating activities of $104.6 million decreased by $3.1 million compared to fourth quarter 2023 cash flows from operating activities of $107.7 million due to less favorable working capital changes. First quarter 2024 MLP distributable cash flow of $16.9 million increased by $0.5 million compared to fourth quarter 2023 MLP distributable cash flow of $16.4 million, primarily due to lower maintenance capital expenditures.

"Our first quarter of 2024 results were consistent with our performance in recent quarters due in large part to the stability provided by our ethylene supply agreement with Westlake. During the first quarter, OpCo's ethylene units ran well and third-party ethylene margins improved modestly due to lower feedstock and energy costs, which allowed us to opportunistically increase our third-party sales volume," said Albert Chao, President and Chief Executive Officer. "We are constructive on our outlook for the remainder of 2024 as demand from downstream ethylene derivative products is relatively stable and feedstock and energy costs remain at levels supporting third-party ethylene margin improvement."

On April 30, 2024, the Partnership announced that the Board of Directors of Westlake Chemical Partners GP LLC had approved a quarterly distribution for the first quarter of 2024 of $0.4714 per unit to be payable on May 29, 2024 to unitholders of record as of May 13, 2024, representing the 39th consecutive quarterly distribution to our unitholders. MLP distributable cash flow provided trailing twelve-month coverage of 0.93x the declared distributions for the first quarter of 2024, which was in-line with the trailing twelve-month coverage ratio of 0.94x at the end of the fourth quarter of 2023. Since our IPO in July of 2014 our cumulative coverage ratio is 1.08x.

OpCo's Ethylene Sales Agreement with Westlake is designed to provide for stable and predictable cash flows. The agreement provides that 95% of OpCo's ethylene production is sold to Westlake for a cash margin of $0.10 per pound, net of operating costs, maintenance capital expenditures and reserves for future turnaround expenditures.

The statements in this release and the related teleconference relating to matters that are not historical facts, such as those with respect to the results of our turnaround reserves and activities, our future coverage ratio, our outlook for third-party ethylene margins, our expectations regarding feedstock and energy costs, our expectations regarding future interest rates, the ability to deliver value, returns, predictable cash flows and distributions to unitholders, the expectation that strong distributions will continue, and the nature of the sales agreement with Westlake, are forward-looking statements. These forward-looking statements are subject to significant risks and uncertainties. Actual results could differ materially, based on factors including, but not limited to, pandemic infectious diseases and the response thereto; operating difficulties; the volume of ethylene that we are able to sell; the price at which we are able to sell ethylene; changes in the price and availability of feedstocks; changes in prevailing economic conditions; actions and commitments of Westlake Corporation; actions of third parties; inclement or hazardous weather conditions, including flooding, and the physical impacts of climate change; environmental hazards; changes in laws and regulations (or the interpretation thereof); inability to acquire or maintain necessary permits; inability to obtain necessary production equipment or replacement parts; technical difficulties or failures; labor disputes; difficulty collecting receivables; inability of our customers to take delivery; fires, explosions or other industrial accidents; our ability to borrow funds and access capital markets; and other risk factors. For more detailed information about the factors that could cause actual results to differ materially, please refer to the Partnership's Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC in February 2024.

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

Use of Non-GAAP Financial Measures

This release makes reference to certain "non-GAAP" financial measures, such as MLP distributable cash flow and EBITDA. For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as a numerical measure of a registrant's historical or future financial performance, financial position or cash flows that (1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or (2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. We report our financial results in accordance with U.S. GAAP, but believe that certain non-GAAP financial measures, such as MLP distributable cash flow and EBITDA, provide useful supplemental information to investors regarding the underlying business trends and performance of our ongoing operations and are useful for period-over-period comparisons of such operations. These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, or superior to, the financial measures prepared in accordance with U.S. GAAP. We define MLP distributable cash flow as distributable cash flow less distributable cash flow attributable to Westlake Corporation's noncontrolling interest in OpCo and distributions attributable to the incentive distribution rights holder. MLP distributable cash flow does not reflect changes in working capital balances. We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. MLP distributable cash flow and EBITDA are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess our operating performance as compared to other publicly traded partnerships, our ability to incur and service debt and fund capital expenditures and the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities. Reconciliations of MLP distributable cash flow to net income and to net cash provided by operating activities and of EBITDA to net income, income from operations and net cash provided by operating activities can be found in the financial schedules at the end of this press release.

Westlake Chemical Partners LP

Westlake Chemical Partners is a limited partnership formed by Westlake Corporation to operate, acquire and develop ethylene production facilities and other qualified assets. Headquartered in Houston, the Partnership owns a 22.8% interest in Westlake Chemical OpCo LP. Westlake Chemical OpCo LP's assets consist of three ethylene production facilities in Calvert City, Kentucky, and Lake Charles, Louisiana, and an ethylene pipeline. For more information about Westlake Chemical Partners LP, please visit http://www.wlkpartners.com.

Westlake Chemical Partners LP Conference Call Information:

A conference call to discuss Westlake Chemical Partners' first quarter 2024 results will be held Wednesday, May 1st, 2024 at 1:00 PM Eastern Time (12:00 PM Central Time). To access the conference call, please register at: https://register.vevent.com/register/BI945f608342d94f3bb7f420c75004538c. A dial-in will be provided upon registration.

The conference call will also be available via webcast at: https://edge.media-server.com/mmc/p/2ry9ktig and the earnings release can be obtained via the Partnership web page at: https://investors.wlkpartners.com/corporate-profile/default.aspx.

WESTLAKE CHEMICAL PARTNERS LP ("WESTLAKE PARTNERS")
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
		Three Months Ended March 31,
		2024				2023
		(In thousands of dollars, except per unit data)
Revenue
Net sales—Westlake Corporation ("Westlake")		$	235,209			$	257,471
Net co-products, ethylene and other sales—third parties			49,464				50,206
Total net sales			284,673				307,677
Cost of sales			182,493				201,604
Gross profit			102,180				106,073
Selling, general and administrative expenses			7,077				7,914
Income from operations			95,103				98,159
Other income (expense)
Interest expense—Westlake			(6,581	)			(7,315	)
Other income, net			1,334				820
Income before income taxes			89,856				91,664
Provision for income taxes			210				212
Net income			89,646				91,452
Less: Net income attributable to noncontrolling interest in Westlake Chemical OpCo LP ("OpCo")			74,813				76,560
Net income attributable to Westlake Partners		$	14,833			$	14,892
Net income per limited partner unit attributable to Westlake Partners (basic and diluted)
Common units		$	0.42			$	0.42
Distributions declared per unit		$	0.4714			$	0.4714
MLP distributable cash flow		$	16,892			$	17,551
Distributions declared
Limited partner units—publicly and privately held		$	9,950			$	9,946
Limited partner units—Westlake			6,657				6,657
Total distributions declared		$	16,607			$	16,603
EBITDA		$	124,431			$	125,615

WESTLAKE CHEMICAL PARTNERS LP
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
		March 31, 2024				December 31, 2023
		(In thousands of dollars)
ASSETS
Current assets
Cash and cash equivalents		$	55,760			$	58,619
Receivable under the Investment Management Agreement—Westlake			94,477				94,444
Accounts receivable, net—Westlake			41,766				49,565
Accounts receivable, net—third parties			27,228				18,701
Inventories			4,860				4,432
Prepaid expenses and other current assets			257				442
Total current assets			224,348				226,203
Property, plant and equipment, net			926,813				943,843
Other assets, net			143,915				146,796
Total assets		$	1,295,076			$	1,316,842
LIABILITIES AND EQUITY
Current liabilities (accounts payable and accrued and other liabilities)		$	43,083			$	56,335
Long-term debt payable to Westlake			399,674				399,674
Other liabilities			4,074				4,583
Total liabilities			446,831				460,592
Common unitholders—publicly and privately held			472,450				473,513
Common unitholder—Westlake			48,282				48,993
General partner—Westlake			(242,572	)			(242,572	)
Total Westlake Partners partners' capital			278,160				279,934
Noncontrolling interest in OpCo			570,085				576,316
Total equity			848,245				856,250
Total liabilities and equity		$	1,295,076			$	1,316,842

WESTLAKE CHEMICAL PARTNERS LP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
		Three Months Ended March 31,
		2024				2023
		(In thousands of dollars)
Cash flows from operating activities
Net income		$	89,646			$	91,452
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization			27,994				26,636
Net loss on disposition and other			527				942
Other balance sheet changes			(13,602	)			25,830
Net cash provided by operating activities			104,565				144,860
Cash flows from investing activities
Additions to property, plant and equipment			(9,773	)			(12,656	)
Investments with Westlake under the Investment Management Agreement			—				(90,116	)
Maturities of investments with Westlake under the Investment Management Agreement			—				103,000
Net cash used for investing activities			(9,773	)			228
Cash flows from financing activities
Proceeds from debt payable to Westlake			54,000				39,000
Repayment of debt payable to Westlake			(54,000	)			(39,000	)
Distributions to noncontrolling interest retained in OpCo by Westlake			(81,044	)			(88,678	)
Distributions to unitholders			(16,607	)			(16,604	)
Net cash used for financing activities			(97,651	)			(105,282	)
Net increase in cash and cash equivalents			(2,859	)			39,806
Cash and cash equivalents at beginning of period			58,619				64,782
Cash and cash equivalents at end of period		$	55,760			$	104,588

WESTLAKE CHEMICAL PARTNERS LP
RECONCILIATION OF MLP DISTRIBUTABLE CASH FLOW TO NET INCOME
AND NET CASH PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
		Three Months Ended December 31,				Three Months Ended March 31,
		2023				2024				2023
		(In thousands of dollars)
Net cash provided by operating activities		$	107,671			$	104,565			$	144,860
Changes in operating assets and liabilities and other			(20,614	)			(14,919	)			(53,408	)
Net income			87,057				89,646				91,452
Add:
Depreciation, amortization and disposition of property, plant and equipment			28,796				28,265				27,003
Less:
Contribution to turnaround reserves			(7,682	)			(11,476	)			(7,306	)
Maintenance capital expenditures			(11,805	)			(7,749	)			(8,024	)
Distributable cash flow attributable to noncontrolling interest in OpCo			(79,948	)			(81,794	)			(85,574	)
MLP distributable cash flow		$	16,418			$	16,892			$	17,551

WESTLAKE CHEMICAL PARTNERS LP
RECONCILIATION OF EBITDA TO NET INCOME, INCOME FROM OPERATIONS AND NET CASH
PROVIDED BY OPERATING ACTIVITIES
(Unaudited)
		Three Months Ended December 31,				Three Months Ended March 31,
		2023				2024				2023
		(In thousands of dollars)
Net cash provided by operating activities		$	107,671			$	104,565			$	144,860
Changes in operating assets and liabilities and other			(20,614	)			(14,919	)			(53,408	)
Net income			87,057				89,646				91,452
Less:
Other income, net			1,079				1,334				820
Interest expense—Westlake			(6,632	)			(6,581	)			(7,315	)
Provision for income taxes			(206	)			(210	)			(212	)
Income from operations			92,816				95,103				98,159
Add:
Depreciation and amortization			28,301				27,994				26,636
Other income, net			1,079				1,334				820
EBITDA		$	122,196			$	124,431			$	125,615

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240501851812/en/

Contact—(713) 585-2900

Investors—Steve Bender

Media—L. Benjamin Ederington

Source: Westlake Chemical Partners

FAQ

What was Westlake Chemical Partners LP's net income for Q1 2024?

Westlake Chemical Partners LP reported net income of $14.8 million for Q1 2024.

What was the declared quarterly distribution per unit for Q1 2024?

The declared quarterly distribution per unit for Q1 2024 was $0.4714.

What was the MLP distributable cash flow for Q1 2024?

The MLP distributable cash flow for Q1 2024 was $16.9 million.

What is the ticker symbol of Westlake Chemical Partners LP?

The ticker symbol of Westlake Chemical Partners LP is WLKP.

What is the outlook for 2024 mentioned in the PR?

The partnership remains optimistic for 2024 due to stable demand for ethylene derivative products and favorable margins.