Westlake Chemical Partners LP (WLKP) 2023 Q3 法說會逐字稿

Good afternoon, and thank you for standing by. Welcome to the Westlake Chemical Partners Third Quarter 2023 Earnings Conference Call. (Operator Instructions). As a reminder, this conference is being recorded today, November 2, 2023.

下午好，感謝您的耐心等待。歡迎參加 Westlake Chemical Partners 2023 第三季財報電話會議。 （操作員說明）。謹此提醒，本次會議於今日（2023 年 11 月 2 日）進行錄音。

I would now like to turn the conference over to today's host, Jeff Holy, Westlake Chemical Partners Vice President and Treasurer. Sir, you may begin.

現在我想將會議交給今天的東道主、Westlake Chemical Partners 副總裁兼財務主管 Jeff Holy。先生，您可以開始了。

Thank you, Antoine. Good afternoon, everyone, and welcome to the Westlake Chemical Partners Third Quarter 2023 Conference Call. I'm joined today by Albert Chao, our President and CEO; Steve Bender, our Executive Vice President and CFO; and other members of our management team.

謝謝你，安托萬。大家下午好，歡迎參加 Westlake Chemical Partners 2023 年第三季電話會議。今天我們的總裁兼執行長 Albert Chao 也加入了我的行列。 Steve Bender，我們的執行副總裁兼財務長；以及我們管理團隊的其他成員。

During this call, we refer to ourselves as Westlake Partners or the partnership. References to Westlake refer to our parent company, Westlake Corporation; and references to OpCo refer to Westlake Chemical OpCo LP, a subsidiary of Westlake and the Partnership, which owns certain olefins assets. Additionally, when we refer to distributable cash flow, we are referring to Westlake Chemical Partners' MLP distributable cash flow.

在本次電話會議中，我們將自己稱為 Westlake Partners 或合夥企業。 Westlake 指的是我們的母公司 Westlake Corporation；提及 OpCo 時指的是 Westlake Chemical OpCo LP，它是 Westlake 和合夥企業的子公司，擁有某些烯烴資產。此外，當我們提到可分配現金流時，我們指的是 Westlake Chemical Partners 的 MLP 可分配現金流。

Definitions of these terms are available on the Partnership's 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. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements and our regulatory filings, which are also available on our Investor Relations website.

這些術語的定義可在合作夥伴的網站上找到。今天，管理層將討論某些主題，其中包含基於管理層信念以及管理層所做的假設和當前可獲得的資訊的前瞻性資訊。這些前瞻性陳述暗示了預測或預期，因此存在風險或不確定性。我們鼓勵您透過查看警示聲明和我們的監管文件（也可以在我們的投資者關係網站上找到）來詳細了解可能導致我們的實際結果有所不同的因素。

This morning, Westlake Partners issued a press release with details of our third quarter 2023 financial and operating results. This document is available in the Press Release section of our web page at wlkpartners.com. A replay of today's call will be available beginning 2 hours after the conclusion of this call. The replay may be accessed via the partnership's website. Please note that information reported on this call speaks only as of today, November 2, 2023. And therefore, you're advised that time-sensitive information may no longer be accurate as of the time of any replay. I would finally advise you that this conference call is being broadcast live through an Internet webcast system that can be accessed on our web page at wlkpartners.com.

今天上午，Westlake Partners 發布了一份新聞稿，詳細介紹了我們 2023 年第三季的財務和營運表現。本文檔可在我們 wlkpartners.com 網頁的新聞稿部分取得。今天的電話會議的重播將在本次電話會議結束 2 小時後開始提供。可以透過合作夥伴的網站存取重播。請注意，本次電話會議報告的資訊僅截至今天（2023 年 11 月 2 日）。因此，我們建議您，時間敏感的資訊在任何重播時可能不再準確。最後我想提醒您，本次電話會議將透過網路網路廣播系統進行現場直播，您可以透過我們的網頁 wlkpartners.com 存取該系統。

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

現在我想把電話轉給Albert Chao。阿爾伯特？

Thank you, Jeff. Good afternoon everyone and thank you for joining us to discuss our third quarter 2023 results. In this morning's press release, we reported Westlake Partners' third quarter 2023 net income of $13 million or $0.37 per unit. Compared to the second quarter, our third quarter sales and earnings benefited from higher production and sales volumes following the completion of the Calvert City turnaround in May. The stability of Westlake Partners business model is consistently demonstrated through our fixed margin ethylene sales agreement, which minimizes market volatility and other production risks. The high degree of stability in cash flow when compared with the credibility of our business has enabled us to deliver the long history of reliable distributions and coverage. This quarter's distribution is the 37th consecutive quarterly distribution since the IPO in July of 2014 without any reductions.

謝謝你，傑夫。大家下午好，感謝您加入我們討論我們的 2023 年第三季業績。在今天早上的新聞稿中，我們報告了 Westlake Partners 2023 年第三季的淨利潤為 1300 萬美元，即每單位 0.37 美元。與第二季相比，我們第三季的銷售額和收益受益於卡爾弗特市五月完成扭虧為盈後產量和銷售的增加。 Westlake Partners 業務模式的穩定性透過我們的固定利潤乙烯銷售協議得到了一致證明，該協議最大限度地減少了市場波動和其他生產風險。與我們業務的可信度相比，現金流的高度穩定性使我們能夠提供可靠的分銷和覆蓋範圍的悠久歷史。本季的派息是自2014年7月IPO以來連續第37季派息，沒有任何減少。

I would now like to turn our call over to Steve to provide more detail on the financial and operating results for the quarter. Steve?

我現在想將我們的電話轉給史蒂夫，以提供有關本季度財務和營運業績的更多詳細資訊。史蒂夫？

Thank you, Albert, and good afternoon, everyone. In this morning's press release, we reported Westlake Partners' third quarter 2023 net income of $13 million or $0.37 per unit. Consolidated net income, including OpCo's earnings was $81 million on consolidated net sales of $322 million. The partnership had distributable cash flow for the quarter of $14 million or $0.39 per unit. Third quarter 2023 net income for Westlake Partners of $13 million decreased by $2 million compared to third quarter 2022 partnership net income of $15 million.

謝謝你，阿爾伯特，大家下午好。在今天早上的新聞稿中，我們報告了 Westlake Partners 2023 年第三季的淨利潤為 1300 萬美元，即每單位 0.37 美元。包括 OpCo 收益在內的綜合淨利潤為 8,100 萬美元，綜合淨銷售額為 3.22 億美元。該合夥企業本季的可分配現金流量為 1,400 萬美元，即每單位 0.39 美元。 Westlake Partners 2023 年第三季淨利為 1,300 萬美元，比 2022 年第三季合夥企業淨利 1,500 萬美元減少了 200 萬美元。

Compared to the third quarter of 2022, the partnership was impacted by higher interest expense. Distributable cash flow of $14 million for the third quarter of 2023 decreased by $3 million compared to third quarter 2022 distributable cash flow of $17 million due to the $2 million decline in net income and higher maintenance capital expenditures. The year-over-year increase in maintenance capital spending in the third quarter is due to a change in timing as our 2023 capital program is more weighted than the second half of the year as compared to 2022.

與 2022 年第三季相比，此合作關係受到利息支出增加的影響。由於淨利潤減少 200 萬美元以及維護資本支出增加，2023 年第三季可分配現金流為 1,400 萬美元，與 2022 年第三季可分配現金流量 1,700 萬美元相比減少了 300 萬美元。第三季維護資本支出年增是由於時間安排的變化，因為與 2022 年相比，我們的 2023 年資本計畫比下半年的權重更大。

Turning our attention to the balance sheet and cash flows. At the end of the third quarter, we had consolidated cash and cash investments with Westlake through our investment management agreement totaling $150 million. Long-term debt at the end of the quarter was $400 million, of which $377 million was at the Partnership and the remaining $23 million was at OpCo. In the third quarter of 2023, OpCo spent $17 million on capital expenditures. We maintained our strong leverage metrics with a consolidated leverage ratio of approximately 1x.

將我們的注意力轉向資產負債表和現金流量。截至第三季末，我們透過投資管理協議與 Westlake 合併了總計 1.5 億美元的現金和現金投資。本季末的長期債務為 4 億美元，其中 3.77 億美元屬於合夥企業，其餘 2,300 萬美元屬於 OpCo。 2023年第三季度，OpCo的資本支出為1,700萬美元。我們維持了強勁的槓桿指標，綜合槓桿比率約為 1 倍。

On October 31, 2023, we announced a quarterly distribution of $0.4714 per unit with respect to the third quarter of 2023. Since our IPO in 2014, the Partnership has made 37 consecutive quarterly distributions to our unitholders, and we have grown our distributions 71% since the Partnership's original minimum quarterly distribution of $0.275 per unit. The Partnership's third quarter distribution will be paid on November 27, 2023, to unitholders of record November 10, 2023. The Partnership's predictable fee-based cash flow continues to prove beneficial in today's economic environment and is differentiated by the consistency of our earnings and cash flows.

2023 年10 月31 日，我們宣布2023 年第三季的季度分配為每單位0.4714 美元。自2014 年IPO 以來，合夥企業已連續37 次向我們的單位持有人進行季度分配，我們的分配增長了71%由於合夥企業最初的最低季度分配為每單位 0.275 美元。該合夥企業的第三季分配將於2023 年11 月27 日支付給2023 年11 月10 日記錄在案的單位持有人。該合夥企業的可預測收費現金流在當今的經濟環境中繼續證明是有益的，並且我們的收益和現金的一致性使其與眾不同流動。

Looking back since our IPO in July of 2014, we have maintained a cumulative distribution cash flow of approximately 1x. And with the partnership stability and cash flows, we're able to sustain the current distribution without the need to access the capital markets. For modeling purposes, our next planned turnaround is at our Petro 1 ethylene unit in Lake Charles, Louisiana, which is currently planned for mid-2024. And we'll provide additional details on the turnaround once we complete our turnaround planning.

回顧2014年7月IPO以來，我們的累積分配現金流量維持在約1倍。憑藉合作夥伴關係的穩定性和現金流，我們能夠維持當前的分配，而無需進入資本市場。出於建模目的，我們計劃的下一次檢修是在路易斯安那州查爾斯湖的 Petro 1 乙烯裝置進行，目前計劃於 2024 年中期進行。完成週轉計劃後，我們將提供有關週轉的更多詳細資訊。

Now I'd like to turn the call back over to Albert for some closing comments. Albert?

現在我想將電話轉回阿爾伯特以徵求一些結束語。阿爾伯特？

Thank you, Steve. We are pleased with the Partnership's financial and operational performance in the third quarter. We believe that this performance should continue through the rest of the year. We remain optimistic about the demand fundamentals for our globally cost advantage ethylene, driven by steady domestic demand for ethylene derivatives and export opportunities at our parent Westlake. Our ethylene sales agreement, which provides a predictable fee-based cash flow structure from our take-or-pay contract with Westlake for 95% of OpCo's production will continue to deliver stable and predictable cash flows through economic ups and downs as well as planned and unplanned turnarounds.

謝謝你，史蒂夫。我們對合作夥伴第三季的財務和營運業績感到滿意。我們相信這種表現應該會持續到今年剩餘時間。在國內對乙烯衍生物的穩定需求和母公司 Westlake 的出口機會的推動下，我們對全球成本優勢乙烯的需求基本面保持樂觀。我們的乙烯銷售協議根據我們與Westlake 簽訂的照付不議合約為OpCo 95% 的產量提供了可預測的收費現金流結構，該協議將在經濟起起落落以及計劃和計劃中繼續提供穩定且可預測的現金流。計劃外的周轉。

Turning to our capital structure. We maintained a strong balance sheet with conservative financial and leverage metrics. As we continue to navigate market conditions, we'll evaluate opportunities. We are 4 levers of growth in the future, including increases of our ownership interest of OpCo; acquisition of other qualified income streams; organic growth opportunities, such as expansions of our current ethylene facilities; and negotiation of a higher fixed margin in our ethylene sales agreement with Westlake.

轉向我們的資本結構。我們透過保守的財務和槓桿指標維持了強勁的資產負債表。當我們繼續了解市場狀況時，我們將評估機會。我們未來的成長有4個槓桿，包括增加我們對OpCo的所有權權益；獲得其他合格的收入來源；有機成長機會，例如擴大我們現有的乙烯設施；並與 Westlake 就乙烯銷售協議中更高的固定利潤進行談判。

We remain focused on our ability to continue to provide long-term value and distributions to our unitholders. As always, we will continue to focus on safe operations along with being good stewards of the environment where we work and live as part of our broader sustainability efforts.

我們仍然專注於繼續為我們的單位持有人提供長期價值和分配的能力。一如既往，我們將繼續專注於安全運營，並成為我們工作和生活環境的好管理者，作為我們更廣泛的永續發展努力的一部分。

Thank you very much for listening to our third quarter earnings call. Now I'll turn the call back over to Jeff.

非常感謝您收聽我們的第三季財報電話會議。現在我將把電話轉回傑夫。

Thank you, Albert. Before we begin taking questions, I'd like to remind you that a replay of this teleconference will be available 2 hours after the call has ended.

謝謝你，艾伯特。在我們開始回答問題之前，我想提醒您，電話會議結束後 2 小時將提供本次電話會議的重播。

Antoine, we will now take questions.

安托萬，我們現在開始提問。

(Operator Instructions) Our first question comes from Matthew Blair from TPH.

（操作員說明）我們的第一個問題來自 TPH 的 Matthew Blair。

I wanted to touch on the planned maintenance expenses that, Steve, I believe you said would be a little bit higher in the back half of 2023. It sounded like this was just a timing issue, but I wanted to see if you're seeing any sort of impacts from higher inflation or higher labor costs rolling through. Does that mean that your CapEx would be structurally higher going forward? And if so, does that present any risk to the current distribution?

我想談談計劃維護費用，史蒂夫，我相信你說 2023 年下半年會更高一些。聽起來這只是一個時間問題，但我想看看你是否看到了通膨上升或勞動力成本上升帶來的任何影響都會隨之而來。這是否意味著您未來的資本支出在結構上會更高？如果是這樣，這會對當前的發行版帶來任何風險嗎？

Yes. It's a very good question, Matthew. And certainly, as we continue our turnaround planning for next year for our ethylene unit. It's something that we're certainly taking into consideration. I do not see it as a risk because as you may recall, we think about budgeting for the capital expenditures related to the turnaround and those are built on a regular basis to Westlake by OpCo.

是的。這是一個非常好的問題，馬修。當然，隨著我們繼續制定明年乙烯裝置的周轉計畫。這是我們當然正在考慮的事情。我不認為這是一個風險，因為你可能還記得，我們​​考慮了與扭虧為盈相關的資本支出的預算，而這些預算是由 OpCo 定期為 Westlake 建立的。

And so should we see inflation as it relates to manpower or materials, we're able to accumulate that turnaround reserve to be able to offset potentially higher cost in either one of those two categories. So we don't see it as a risk to the ability to generate the cash and be able to make a distribution to meet the distribution requirements for a payment to our unitholders.

因此，如果我們看到與人力或材料相關的通貨膨脹，我們就能夠累積週轉儲備，以便能夠抵消這兩個類別之一中潛在的更高成本。因此，我們認為這不會對產生現金和進行分配以滿足向單位持有人付款的分配要求的能力構成風險。

(Operator Instructions) Our next question comes from Vincent Andrews from Morgan Stanley.

（操作員指令）我們的下一個問題來自摩根士丹利的文森特安德魯斯。

Just wondering -- just looking at the margin expansion you saw in the housing segment. Just curious if you could talk about -- I know the release talked about lower cost, but what was the real driver of that, which were the costs? And how does that happen? It just seems like a big margin expansion.

只是想知道——看看你在住房領域看到的利潤擴張。只是好奇你能否談談——我知道該版本談到了更低的成本，但真正的驅動因素是什麼，成本是什麼？這是怎麼發生的？這看起來就像是利潤率的大幅擴張。

You're talking about in our building products segment?

您指的是我們的建築產品領域嗎？

Yes, exactly. Yes, exactly.

對，就是這樣。對，就是這樣。

Yes. And so Vincent, the expansion really came from the fact that we saw lower inputs of a lot of those inputs, of course, are PVC related to the Building Products business as we buy resin from Westlake further downstream into our Building Products business. And certainly, we're able to maintain price prices as best that we could in this market. And as a consequence, we did get some margin expansion. You also saw that we were able to improve volumes quarter-over-quarter in the Building Products division by about 7%. So we've seen strength in volume and certainly challenges in trying to maintain headline price, but because we saw lower input cost, largely PVC resin, we're able to expand that margin in Building Products.

是的。因此，文森特，擴張實際上是因為我們看到很多投入的投入較低，當然，是與建築產品業務相關的 PVC，因為我們從下游的 Westlake 購買樹脂進入我們的建築產品業務。當然，我們能夠在這個市場上盡可能地維持價格。結果，我們的利潤率確實有所擴大。您還看到，我們建築產品部門的銷售量較上季提高了約 7%。因此，我們看到了銷售量的強勁，當然也看到了維持整體價格的挑戰，但由於我們看到投入成本（主要是 PVC 樹脂）降低，我們能夠擴大建築產品的利潤率。

Okay. And then some of the outlook commentary related to mortgage rates and things like that, none of that stuff is necessarily new. So I just couldn't tell whether you were sort of signaling that you're starting to see sort of a more -- a greater impact from those macro issues or whether that's just sort of the ongoing, hey, these are overhangs on the demand environment. So any clarity there would be helpful.

好的。然後是一些與抵押貸款利率等相關的前景評論，這些東西都不一定是新的。所以我無法判斷你是否在發出信號，表明你開始看到這些宏觀問題帶來的更大的影響，或者這是否只是一種持續的，嘿，這些是需求的懸而未決環境。因此，任何澄清都會有所幫助。

Well, yes, I think the compounding effect of the rising mortgage rate is certainly having a dampened effect on demand. And certainly, as we know there's a large macro over drop -- backdrop that is concerning to many homebuyers or potential homebuyers because of the macro uncertainty in the economies and of course, the compounding effect of nearly 8% plus mortgage rate and a 30-year mortgage is even a higher hill to climb, if you will, than just 6 months or a year ago.

嗯，是的，我認為抵押貸款利率上升的複合效應肯定會對需求產生抑製作用。當然，正如我們所知，宏觀經濟出現了大幅下降——這一背景令許多購房者或潛在購房者感到擔憂，因為經濟體的宏觀不確定性，當然還有近8% 以上的抵押貸款利率和30% 的複合效應。如果你願意的話，一年抵押貸款甚至比 6 個月或一年前還要攀登更高的山。

And so I do think that's an issue. And of course, this time of year, we also have a seasonality element that comes into play in terms of just underlying demand. And so as we think about the effect in the fourth quarter for Building Products, certainly continued and higher headwinds related to mortgage rates and interest rates generally as well as the seasonal slowdown that exists and typically persist through the fourth quarter and sometimes into Q1 because of seasonal effects on construction demand.

所以我確實認為這是一個問題。當然，每年的這個時候，季節性因素也會在潛在需求方面發揮作用。因此，當我們考慮第四季度對建築產品的影響時，與抵押貸款利率和利率有關的持續且更大的阻力，以及存在的季節性放緩，通常會持續到第四季度，有時甚至持續到第一季度，因為季節性對建築需求的影響。

At this time, the Q&A session has now ended. I will now turn the call over to Jeff Holy.

至此，問答環節已經結束。我現在將把電話轉給傑夫·霍利。

Thank you. Thank you again for participating in today's call. We hope you'll join us for our next conference call to discuss our fourth quarter 2023 results.

謝謝。再次感謝您參加今天的電話會議。我們希望您能參加我們的下一次電話會議，討論我們 2023 年第四季的業績。

Thank you for participating in today's Westlake Chemical Partners Third Quarter 2023 Earnings Conference Call. As a reminder, this call will be available for replay beginning 2 hours after the call has ended and may be accessed until 11:59 Eastern Time on Thursday, November 16, 2023. The replay can be accessed via the Partnership website. Goodbye.

感謝您參加今天的 Westlake Chemical Partners 2023 年第三季財報電話會議。請注意，本次通話將在通話結束後 2 小時內開始重播，並且可以在美國東部時間 2023 年 11 月 16 日星期四 11:59 之前觀看。可以透過合作夥伴網站存取重播。再見。