Yahoo Finance Westlake Chemical Partners LP (WLKP) (Q1 2024) Earnings Call Transcript Highlights: Stability ...
Net Income: $15 million for Q1 2024, consistent with Q1 2023.
Earnings Per Share (EPS): $0.42 per unit for Q1 2024.
Consolidated Net Sales: $285 million for Q1 2024.
Distributable Cash Flow: $17 million for Q1 2024, slightly down from Q1 2023.
Quarterly Distribution: $0.4714 per unit announced for Q1 2024.
Cash and Investments: Totaling $150 million at the end of Q1 2024.
Long-term Debt: $400 million at the end of Q1 2024.
Capital Expenditures: $10 million spent by OpCo in Q1 2024.
Leverage Ratio: Approximately 1 time, indicating strong leverage metrics.
Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Westlake Chemical Partners LP reported a stable net income of $15 million for Q1 2024, consistent with Q1 2023, demonstrating financial stability.
The partnership benefited from higher sales prices for ethylene sold to Westlake under the ethylene sales agreement, contributing to improved earnings.
Distributable cash flow remained strong at $17 million for the quarter, supporting the 39th consecutive quarterly distribution since the IPO in 2014.
Westlake Chemical Partners LP maintains a strong balance sheet with a consolidated leverage ratio of approximately 1 time, reflecting conservative financial management.
The partnership has a predictable fee-based cash flow structure from a take-or-pay contract with Westlake for 95% of OpCo's production, ensuring stable and predictable cash flows.
Negative Points
First Quarter 2024 net income for Westlake Chemical Partners LP was unchanged compared to first quarter 2023, indicating no growth in net income year-over-year.
The partnership experienced slightly lower production and sales volumes compared to the previous year, which could impact future earnings if the trend continues.
Distributable cash flow for Q1 2024 decreased slightly by less than $1 million compared to Q1 2023, due to lower production and sales volumes.
A planned turnaround at the Petro one ethylene unit in Lake Charles, Louisiana, scheduled for the second half of 2024, is expected to impact distribution coverage ratios temporarily.
Despite stable financial metrics, the overall global macroeconomic environment remains unpredictable, posing potential risks to future performance.
Q & A Highlights
Q: What was the driver of the higher sales price to Westlake in Q1 2024? A: Albert Chao, President and CEO of Westlake Chemical Partners, clarified that the higher sales prices were related to external third-party sales with improved margins, not sales to Westlake itself. The existing sales agreement with Westlake remains unchanged.
Q: Can you discuss the outlook for coverage improvement in the next quarter? A: Albert Chao mentioned that coverage is expected to trend higher as the effects of last year's turnaround roll off. He anticipates that coverage will be impacted by a planned turnaround in the second half of 2024 but expects a rebound similar to previous years.
Q: As you consider options to expand the company or its earnings, does it require a better margin in your agreement with Westlake? A: Albert Chao explained that expanding earnings or the company does not necessarily require a different margin in the sales agreement with Westlake. The focus is on the valuation of transactions, whether it involves increasing ownership in OpCo or acquiring other assets.
Q: Regarding sustainability, is there a plan for the assets included in Westlake Partners to reduce Scope 1 and Scope 2 emissions? A: Albert Chao affirmed ongoing efforts to reduce Scope 1 and Scope 2 emissions, including investing in capital that reduces these emissions and exploring opportunities to undertake transactions that support these goals.
Q: What was the impact of the Calvert City turnaround from Q2 2023 on the coverage ratio? A: Albert Chao indicated that the coverage ratio was impacted by the Calvert City turnaround but expects an improvement in the coverage ratio in Q2 2024 as the effects of the turnaround are mitigated.
Q: How does the partnership view potential growth opportunities in the current economic environment? A: Albert Chao highlighted that the partnership is evaluating growth opportunities through various levers, including acquisitions and organic growth opportunities, while maintaining a focus on providing long-term value and distributions to unitholders.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
