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Item 2 — Management's Discussion and Analysis
Westlake Corporation · 10-Q · Q2 FY2026 · Period ended Jun 30, 2026
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This discussion and analysis should be read in conjunction with information contained in the accompanying unaudited consolidated interim financial statements of Westlake Corporation and the notes thereto and the consolidated financial statements and notes thereto of Westlake Corporation included in Westlake Corporation's Annual Report on Form 10-K for the fiscal year ended December 31, 2025 (the "2025 Form 10-K"). Unless otherwise indicated, references in this report to "we," "our," "us" or like terms refer to Westlake Corporation ("Westlake" or the "Company"). The following discussion contains forward-looking statements. Please read "Forward-Looking Statements" for a discussion of limitations inherent in such statements.
Overview
We are a vertically integrated global manufacturer and marketer of both housing and infrastructure products and performance and essential materials. We operate in two principal operating segments, Housing and Infrastructure Products ("HIP") and Performance and Essential Materials ("PEM"). The HIP segment includes Westlake Royal Building Products, Westlake Pipe & Fittings and Westlake Global Compounds. The PEM segment includes Westlake North American Chlorovinyls, Westlake European & Asian Chlorovinyls, Westlake Olefins and Polyethylene and Westlake Epoxy. We are highly integrated along our materials chain with significant downstream integration from ethylene and chlor-alkali ("chlorine and caustic soda") into vinyls, polyethylene ("PE") and epoxy. We also have substantial downstream integration from polyvinyl chloride ("PVC") into our HIP segment for our residential building products, PVC pipe and fittings, and PVC compounds.
Recent Developments
Acquisition of PVC and VCM Production Site in Wilhelmshaven, Germany
On June 15, 2026, the Company's German subsidiary, Westlake Vinnolit GmbH & Co. KG, completed the acquisition of a PVC and vinyl chloride monomer ("VCM") production site located in Wilhelmshaven, Germany (the "Wilhelmshaven plant") for a preliminary purchase price of approximately $109 million, subject to various adjustments. The Wilhelmshaven plant has the capacity to produce 838 million pounds of PVC and 882 million pounds of VCM annually. The Wilhelmshaven plant benefits from advantageous logistical infrastructure, including a deep-water dock that enables efficient raw-materials supply. The acquisition is expected to expand the Company's global chlorovinyls manufacturing footprint and complement the Company's existing chlorovinyl production facilities in Europe and North America. The assets acquired and liabilities assumed and the results of operations of the Wilhelmshaven plant are included in the Performance and Essential Materials segment.
Redemption of 3.60% 2026 Senior Notes
On May 29, 2026 the Company redeemed all $496 million aggregate principal amount of its outstanding 3.60% 2026 Senior Notes at a price equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest through the redemption date.
Replacement of Credit Agreement
On April 2, 2026, the Company entered into a credit agreement for an unsecured revolving credit facility in an aggregate principal amount of up to $1.5 billion. The new revolving credit facility replaces the Company's previous $1.5 billion revolving credit facility, which was terminated on April 2, 2026. See Liquidity and Capital Resources—Debt—Credit Agreement below, and Note 8 "Long-Term Debt" to the unaudited consolidated financial statements appearing elsewhere in this Form 10-Q, for more information.
Middle East Conflict
In February 2026, a military conflict primarily involving the United States, Israel and Iran commenced in the Middle East. As a result, the global energy, petrochemical and transportation markets have experienced significant volatility and supply constraints with naphtha based petrochemical producers in particular facing significantly higher production costs and feedstock supply limitations. Although we do not have operations in the Middle East and the substantial majority of our energy and feedstock requirements are sourced from North America and do not use naphtha-based supply, the ongoing disruptions to global shipping and elevated logistical costs continue to create inflationary pressures across our broader supply-chain. These disruptions may continue for an undeterminable period of time, leading to higher costs for feedstocks and energy and logistics services. We are actively assessing these conditions and their potential impact on our global operations. Please also see our Outlook section below for discussion of potential impacts on our HIP and PEM segments.
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Outlook
Housing and Infrastructure Products
Our HIP segment is primarily comprised of residential building products, PVC pipe and fittings, and compound products made from PVC and other polymers. Our sales are affected by the level of new home construction and home repair and remodeling activity, particularly in North America, water infrastructure spending for our pipe and fittings business, as well as the decisions of distributors and dealers on the levels of inventory they carry, their views on product demand, their financial condition and the manner in which they choose to manage inventory risk, and customer decision on product selection based on price, aesthetics, and performance among other characteristics. Performance of our HIP businesses generally reflects the trends of building permits and housing starts in the New Residential Construction Survey by the U.S. Census Bureau and the Repair and Remodeling Index (RRI) provided by the National Association of Home Builders (the "NAHB") among others. We also expect that the preceding historically low level of residential housing construction that has resulted in an undersupply of existing housing may benefit our HIP segment in the medium to long-term. Furthermore, the ongoing geopolitical volatility in the Middle East has impacted the global supply of crude oil and increased crude oil prices, increasing our distribution and certain raw material costs. Additionally, while recent U.S. Federal Reserve actions to cut interest rates have supported an improved outlook for North American housing demand, a prolonged Middle East conflict and other uncertainties may create sustained inflationary pressures which may impede further interest rate reductions, or cause interest rates to rise, adversely affecting demand for our products and our margins.
Performance and Essential Materials
Our PEM segment manufactures products such as ethylene, PE, chlor-alkali, chlorinated derivative products, ethylene dichloride, VCM and PVC, many of which are used in our integrated vinyls production chain. The chlor-alkali and petrochemical industries exhibit cyclical commodity characteristics, and margins are influenced by changes in the balance between global supply and demand and the resulting operating rates, the level of general economic activity, turnaround activities and the price of raw materials. We have continued to experience lower prices, increased supply and weaker demand for most of our PEM products globally since 2022. However, the current geopolitical volatility in the Middle East due to the conflict that commenced in February 2026 created feedstock shortages and higher production costs for naphtha-based manufacturers in Asia, driving up global prices for performance and essential materials products. Our North American operations have been less affected by the conflict and hold a competitive advantage due to lower natural gas and power costs, creating opportunities to increase price and supply to domestic and global markets. However, we remain cautious of headwinds impacting our operations in Europe and Asia, including slower economic growth in China, margin compression, and trade disruptions from tariffs. Significant uncertainties remain regarding the duration of the war in Ukraine, the resolution of the Middle East conflict, the subsequent recovery period, return of supply-chain stability in the Middle East and potential broader demand destruction due to inflationary pressures.
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Non-GAAP Financial Measures
The body of accounting principles generally accepted in the United States is commonly referred to as "GAAP." For this purpose, a non-GAAP financial measure is generally defined by the Securities and Exchange Commission ("SEC") as one that purports to measure 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 GAAP in the statement of operations, 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. In this report, we disclose non-GAAP financial measures, primarily earnings before interest, taxes, depreciation and amortization ("EBITDA") and Free Cash Flow. We define EBITDA as net income (loss) before interest expense, income taxes, depreciation and amortization. We define Free Cash Flow as net cash provided by operating activities less additions to property, plant and equipment. The non-GAAP financial measures described in this Form 10-Q are not substitutes for the GAAP measures of earnings and cash flows.
EBITDA is included in this Form 10-Q because our management considers it an important supplemental measure of our performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, some of which present EBITDA when reporting their results. We regularly evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates by using EBITDA. In addition, we utilize EBITDA in evaluating acquisition targets. Management also believes that EBITDA is a useful tool for measuring our ability to meet our future debt service and satisfy capital expenditure and working capital requirements, and EBITDA is commonly used by us and our investors to measure our ability to service indebtedness.
Free Cash Flow is included in this Form 10-Q because our management considers it an important supplemental measure of our performance and believes that it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry, some of which present Free Cash Flow when reporting their results. We regularly evaluate our performance as compared to other companies in our industry that have different financing and capital structures and/or tax rates by using Free Cash Flow. Management also believes that Free Cash Flow is useful to investors and securities analysts to evaluate our liquidity, evaluate strategic investment, evaluate our stock buyback plan and measure our ability to meet our future debt service.
EBITDA and Free Cash Flow are not substitutes for the GAAP measures of net income (loss), income (loss) from operations and net cash provided by operating activities and are not necessarily measures of our ability to fund our cash needs. In addition, companies calculate EBITDA and Free Cash Flow differently and, therefore, EBITDA and Free Cash Flow as presented for us may not be comparable to EBITDA and Free Cash Flow reported by other companies. EBITDA has material limitations as a performance measure because it excludes interest expense, depreciation and amortization and income taxes. Free Cash Flow has material limitations as a performance measure because it only considers net cash provided by operating activities, and not net income (loss) or income (loss) from operations. For instance, it applies to the entire cost of capital expenditure in the period in which the property or equipment is acquired, rather than spreading it over several periods as is the case with net loss and loss from operations.
Reconciliations of EBITDA to net income (loss), income (loss) from operations and net cash provided by operating activities, and Free Cash Flow to net cash provided by operating activities are included in the "Results of Operations" section below.
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Results of Operations
Segment Data
The table below and descriptions that follow represent the consolidated results of operations of the Company for the three and six months ended June 30, 2026 and 2025.
Net External Sales
The table below presents net external sales on a disaggregated basis for our two principal operating segments. Housing Products net external sales primarily consist of sales of housing exterior and interior products, residential pipes and fittings and residential products utilizing PVC compounds. Infrastructure Products net external sales primarily consist of sales of infrastructure related pipes and fittings and infrastructure products utilizing compounds. Performance Materials net external sales primarily consist of sales of PVC, polyethylene and epoxy. Essential Materials net external sales primarily consist of sales of caustic soda, chlorine, styrene, and related derivative materials.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(in millions of dollars, except per share data)
Net external sales
Housing and Infrastructure Products
Housing Products $ 1,011 $ 980 $ 1,799 $ 1,818
Infrastructure Products 241 180 446 338
Total Housing and Infrastructure Products 1,252 1,160 2,245 2,156
Performance and Essential Materials
Performance Materials 1,236 1,022 2,239 2,078
Essential Materials 783 771 1,439 1,565
Total Performance and Essential Materials 2,019 1,793 3,678 3,643
$ 3,271 $ 2,953 $ 5,923 $ 5,799
Income (loss) from operations
Housing and Infrastructure Products $ 212 $ 222 $ 268 $ 370
Performance and Essential Materials 185 (318) (26) (481)
Corporate and other (33) (13) (50) (30)
Total income (loss) from operations 364 (109) 192 (141)
Interest expense (55) (40) (111) (79)
Other income, net 29 24 67 61
Provision for income taxes 67 6 34 7
Net income (loss) 271 (131) 114 (166)
Net income attributable to noncontrolling interests 11 11 23 16
Net income (loss) attributable to Westlake Corporation $ 260 $ (142) $ 91 $ (182)
Earnings (loss) per share $ 2.01 $ (1.11) $ 0.70 $ (1.42)
EBITDA (1) $ 679 $ 210 $ 829 $ 498
Free Cash Flow (2) $ 111 $ (132) $ (192) $ (457)
_____________
(1)See above for discussions on non-GAAP financial measures. See "Reconciliation of EBITDA to Net Income (Loss), Income (Loss) from Operations and Net Cash Provided by Operating Activities" below.
(2)See above for discussions on non-GAAP financial measures. See "Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities" below.
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Three Months Ended June 30, 2026 Six Months Ended June 30, 2026
Average Sales Price Volume Average Sales Price Volume
Net sales percentage change from prior-year period due to average sales price and volume
Housing and Infrastructure Products -3 % +10 % -3 % +7 %
Performance and Essential Materials +14 % -2 % +6 % -5 %
Company average +8 % +3 % +3 % -1 %
Three Months Ended June 30, 2026 Six Months Ended June 30, 2026
Domestic US prices percentage change from prior-year period for fuel cost and feedstock
Fuel cost (Natural Gas) -17 % +10 %
Feedstock (Ethane) -11 % -13 %
Reconciliation of EBITDA to Net Income (Loss), Income (Loss) from Operations and Net Cash Provided by Operating Activities
The following table presents the reconciliation of EBITDA to net income (loss), income (loss) from operations and net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(in millions of dollars)
Net cash provided by operating activities $ 318 $ 135 $ 224 $ 58
Changes in operating assets and liabilities and other (67) (284) (96) (243)
Deferred income taxes 20 18 (14) 19
Net income (loss) 271 (131) 114 (166)
Less:
Other income, net 29 24 67 61
Interest expense (55) (40) (111) (79)
Provision for income taxes (67) (6) (34) (7)
Income (loss) from operations 364 (109) 192 (141)
Add:
Depreciation and amortization 286 295 570 578
Other income, net 29 24 67 61
EBITDA $ 679 $ 210 $ 829 $ 498
Reconciliation of Free Cash Flow to Net Cash Provided by Operating Activities
The following table presents the reconciliation of Free Cash Flow to net cash provided by operating activities, the most directly comparable GAAP financial measure, for each of the periods indicated.
Three Months Ended June 30, Six Months Ended June 30,
2026 2025 2026 2025
(in millions of dollars)
Net cash provided by operating activities $ 318 $ 135 $ 224 $ 58
Less:
Additions to property, plant and equipment 207 267 416 515
Free cash flow $ 111 $ (132) $ (192) $ (457)
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Summary
For the second quarter ended June 30, 2026, net income attributable to Westlake Corporation was $260 million, or $2.01 per diluted share, on net sales of $3,271 million. This represents an increase in net income attributable to Westlake Corporation of $402 million, or $3.12 per diluted share, compared to the second quarter ended June 30, 2025, net loss attributable to Westlake Corporation of $142 million, or $1.11 per diluted share, on net sales of $2,953 million. Income from operations was $364 million for the quarter ended June 30, 2026, as compared to loss from operations of $109 million for the quarter ended June 30, 2025, an increase of $473 million. The increase in net income and income from operations was primarily due to higher sales prices for polyethylene and PVC resin, higher sales volumes for pipe and fittings, caustic soda and epoxy resin, and lower fuel and ethane feedstock costs. Additionally, the increase in net income and income from operations included contribution from the global compounding solutions businesses of the ACI/Perplastic Group (collectively, "ACI"), which was acquired in January 2026. These positive contributions were partially offset by lower pipe and fittings sales prices in the second quarter ended June 30, 2026, as compared to the second quarter ended June 30, 2025. The net income attributable to Westlake Corporation was also negatively affected by higher interest expense in the second quarter ended June 30, 2026, which resulted from a higher average debt balance as compared to the second quarter ended June 30, 2025. The net income and income from operations of the comparable second quarter ended June 30, 2025 were negatively impacted by the recognition of charges of $115 million, related to the closure of the Pernis, Netherlands facility and the closure of operations of the PVC resin unit at the Suzhou Huasu Plastics plant in China.
For the six months ended June 30, 2026, net income attributable to Westlake Corporation was $91 million, or $0.70 per diluted share, on net sales of $5,923 million. This represents an increase in net income attributable to Westlake Corporation of $273 million, or $2.12 per diluted share, compared to the six months ended June 30, 2025, net loss attributable to Westlake Corporation of $182 million, or $1.42 per diluted share, on net sales of $5,799 million. Income from operations was $192 million for the six months ended June 30, 2026, as compared to loss from operations of $141 million for the six months ended June 30, 2025, an increase of $333 million. The increase in net income and income from operations in the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, was primarily due to higher sales prices for polyethylene, PVC resin, caustic soda and epoxy resin, higher sales volumes for pipe and fittings and polyethylene, ACI related compounds sales volumes, and lower ethane feedstock costs. These positive contributions were negatively impacted by higher fuel costs, the recognition of a litigation charge of $67 million related to the settlement of certain PVC pipe antitrust litigation in March 2026, lower pipe and fittings sales prices and lower sales volumes for several of our products. The net income and income from operations of the comparable six months ended June 30, 2025, was negatively impacted by the recognition of charges of $115 million, related to the closure of the Pernis, Netherlands facility and the closure of operations of the PVC resin unit at the Suzhou Huasu Plastics plant in China.
RESULTS OF OPERATIONS
Second Quarter 2026 and Six Months Ended June 30, 2026 Compared with Second Quarter 2025 and Six Months Ended June 30, 2025
(Amounts in tables are in millions of dollars)
Change
Net sales 2026 2025 $ %
Second Quarter ended June 30, $ 3,271 $ 2,953 $ 318 11 %
Six Months ended June 30, 5,923 5,799 124 2 %
Net sales increased by $318 million in the second quarter of 2026 compared to the second quarter of 2025. Average sales prices for the second quarter of 2026 increased by 8% as compared to the second quarter of 2025, primarily because of higher sales prices for polyethylene and PVC resin, partially offset by lower pipe and fittings sales prices. Sales volumes increased by 3% in the second quarter of 2026 as compared to the second quarter of 2025, primarily due to higher sales volumes for pipe and fittings, caustic soda, and epoxy resin, and ACI related compounds sales volumes. These increases in sales volumes were partially offset by lower PVC resin and styrene sales volumes primarily due to certain North American vinyl plants and styrene plant closures in December 2025 as part of our footprint optimization actions.
Net sales increased by $124 million in the six months ended June 30, 2026, compared to the six months ended June 30, 2025. Average sales prices for the six months ended June 30, 2026, increased by 3% as compared to the six months ended June 30, 2025, primarily as a result of higher sales prices for polyethylene, PVC resin, caustic soda and epoxy resin, partially offset by lower pipe and fittings sales prices. Sales volumes decreased by 1% in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to lower sales volumes for PVC resin, chlorine, caustic soda, styrene and building products, which were partially offset by higher pipe and fittings and polyethylene sales volumes, and ACI related compounds sales volumes.
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Change
Gross profit 2026 2025 $ %
Second Quarter ended June 30, $ 652 $ 258 $ 394 153 %
Six Months ended June 30, 764 490 274 56 %
Gross profit margin
Second Quarter ended June 30, 20 % 9 %
Six Months ended June 30, 13 % 8 %
The increase in gross profit margin in the second quarter of 2026, as compared to the second quarter of 2025 was primarily due to higher sales prices for polyethylene and PVC resin, and higher sales volumes for pipe and fittings, caustic soda, and epoxy resin, ACI related compounds sales volumes, and lower fuel and ethane feedstock costs. These positive contributions were partially offset by lower pipe and fittings sales prices.
The increase in gross profit margin in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 was primarily due to higher sales prices for polyethylene, PVC resin, caustic soda and epoxy resin, and higher sales volumes for pipe and fittings, and polyethylene, ACI related compounds sales volumes, and lower ethane feedstock costs. These increases were negatively impacted by higher fuel costs, the recognition of a litigation charge of $67 million related to the settlement of certain PVC pipe antitrust litigation in March 2026, lower pipe and fittings sales prices and lower sales volumes for several of our products.
Change
Selling, general and administrative expenses 2026 2025 $ %
Second Quarter ended June 30, $ 253 $ 221 $ 32 14 %
Six Months ended June 30, 489 448 41 9 %
The increase in selling, general and administrative expenses in the second quarter of 2026 compared with the second quarter of 2025 and in the six months ended June 30, 2026 compared with the six months ended June 30, 2025, were primarily due to higher employee compensation, legal and other consulting and technology-related expenses. The higher selling, general and administrative expenses were also partially due to ACI related expenses.
Change
Amortization of intangibles 2026 2025 $ %
Second Quarter ended June 30, $ 32 $ 31 $ 1 3 %
Six Months ended June 30, 62 61 1 2 %
Amortization expenses related to intangible assets were consistent in the second quarter of 2026, with the second quarter of 2025, and in the six months ended June 30, 2026 with the six months ended June 30, 2025.
Change
Restructuring, transaction and integration-related costs 2026 2025 $ %
Second Quarter ended June 30, $ 3 $ 115 $ (112) (97) %
Six Months ended June 30, 21 122 (101) (83) %
Restructuring, transaction and integration-related costs in the second quarter of 2026 primarily consisted of facility closure costs, which are recognized over time. The restructuring, transaction and integration-related costs in the second quarter of 2025 comprised of $108 million related to the closure of the Pernis, Netherlands facility and $7 million related to the closure of the PVC resin unit at the Suzhou Huasu Plastics plant located in China.
Restructuring, transaction and integration-related costs in the six months ended June 30, 2026, primarily consisted of facility closure costs, which are recognized over time, related to the closures of certain North American chlorovinyls facilities, the styrene facility and the Pernis, Netherlands facility. The restructuring, transaction and integration-related costs in the six months ended June 30, 2025, primarily comprised of $108 million related to the closure of the Pernis facility located in the Netherlands and $7 million related to the closure of the PVC resin unit at the Suzhou Huasu Plastics plant located in China.
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Change
Interest expense 2026 2025 $ %
Second Quarter ended June 30, $ (55) $ (40) $ 15 38 %
Six Months ended June 30, (111) (79) 32 41 %
Interest expense in the second quarter of 2026 as compared to the second quarter of 2025, and in the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, was higher due to a higher average debt balance as a result of the issuance of $600 million aggregate principal amount of 5.550% senior notes due 2035 and $600 million aggregate principal amount of 6.375% senior notes due 2055 in November 2025. The impact of these debt increases was partially offset by the repurchase of $254 million aggregate principal amount of the outstanding 3.60% 2026 Senior Notes pursuant to a tender offer in November 2025 and the redemption of $496 million aggregate principal amount of the remaining outstanding 3.60% 2026 Senior Notes in May 2026.
Change
Other income, net 2026 2025 $ %
Second Quarter ended June 30, $ 29 $ 24 $ 5 21 %
Six Months ended June 30, 67 61 6 10 %
Other income, net in the second quarter of 2026 was consistent with the second quarter of 2025 and in the six months ended June 30, 2026 was consistent with the six months ended June 30, 2025. Other income, net, for all the periods presented primarily comprised of interest income.
2026 2025
Provision for income taxes
Income tax expense
Second Quarter ended June 30, $ 67 $ 6
Six Months ended June 30, 34 7
Effective Income Tax Rate
Second Quarter ended June 30, 19.8 % (4.8) %
Six Months ended June 30, 23.0 % (4.4) %
The effective tax rates were higher in the second quarter of 2026 compared to the second quarter of 2025 and in the six months ended June 30, 2026 compared to the six months ended June 30, 2025, primarily due to a higher valuation allowance recorded against Westlake Epoxy Netherlands's net operating loss in the second quarter of 2025 and in the six months ended June 30, 2025 and higher state taxes in the second quarter of 2026 and in the six months ended June 30, 2026.
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Housing and Infrastructure Products Segment
Change
2026 2025 $ %
Housing and Infrastructure Products Net Sales
Second Quarter ended June 30,
Housing Products $ 1,011 $ 980 $ 31 3 %
Infrastructure Products 241 180 61 34 %
Total Housing and Infrastructure Products $ 1,252 $ 1,160 $ 92 8 %
Six Months ended June 30,
Housing Products $ 1,799 $ 1,818 $ (19) (1) %
Infrastructure Products 446 338 108 32 %
Total Housing and Infrastructure Products $ 2,245 $ 2,156 $ 89 4 %
Net sales for the HIP segment increased by $92 million in the second quarter of 2026 compared to the second quarter of 2025. Total sales volumes for the HIP segment increased by 10% in the second quarter of 2026 as compared to the second quarter of 2025, due to higher pipe and fittings and ACI compounds sales volumes. Average sales prices for the HIP segment decreased by 3% in the second quarter of 2026 as compared to the second quarter of 2025, primarily due to lower sales prices for pipe and fittings. Higher sales of infrastructure products in the second quarter of 2026 were largely attributable to compounds sold by ACI, which was acquired in January 2026.
Net sales for the HIP segment increased by $89 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Total sales volumes for the HIP segment increased by 7% in the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, due to higher pipe and fittings and ACI compounds sales volumes, partially offset by lower building products sales volumes. Average sales prices for the HIP segment decreased by 3% in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to lower sales prices for pipe and fittings. Lower sales of housing products in the six months ended June 30, 2026 were primarily due to lower sales volumes for our roofing building products. Higher sales of infrastructure products in the second quarter of 2026 were largely attributable to compounds sold by ACI.
Change
Income from operations 2026 2025 $ %
Second Quarter ended June 30, $ 212 $ 222 $ (10) (5) %
Six Months ended June 30, 268 370 (102) (28) %
The decrease in income from operations for the HIP segment in the second quarter of 2026, as compared to the second quarter of 2025, was primarily due to lower sales prices for pipe and fittings, which was partially offset by higher pipe and fittings and ACI related compounds sales volumes.
The decrease in income from operations for the HIP segment in the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, was primarily due to lower sales prices for pipe and fittings and lower sales volumes for building products. The HIP segment performance was also negatively impacted by the recognition of a litigation charge of $67 million related to PVC pipe antitrust litigation settlement for certain plaintiffs in the second quarter of 2026. The impact of these decreases was partially offset by higher pipe and fittings and ACI related compounds sales volumes.
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Performance and Essential Materials Segment
Change
2026 2025 $ %
Performance and Essential Materials Net Sales
Second Quarter ended June 30,
Performance Materials $ 1,236 $ 1,022 $ 214 21 %
Essential Materials 783 771 12 2 %
Total Performance and Essential Materials $ 2,019 $ 1,793 $ 226 13 %
Six Months ended June 30,
Performance Materials $ 2,239 $ 2,078 $ 161 8 %
Essential Materials 1,439 1,565 (126) (8) %
Total Performance and Essential Materials $ 3,678 $ 3,643 $ 35 1 %
Net sales for the PEM segment increased by $226 million in the second quarter of 2026, compared to the second quarter of 2025. Average sales prices for the PEM segment increased by 14% in the second quarter of 2026, as compared to the second quarter of 2025, due to higher sales prices for polyethylene and PVC resin. Sales volume for the PEM segment decreased by 2% in the second quarter of 2026, as compared to the second quarter of 2025, due to lower PVC resin and styrene sales volumes, partially offset by higher caustic soda and epoxy sales volumes. Lower PVC resin and styrene sales volumes were due to certain North American plant closures in December 2025 as part of our footprint optimization actions. The higher Performance Materials sales were primarily due to higher polyethylene and PVC resin sales prices, partially offset by the closure of certain North American vinyl plants in December 2025. The higher Essential Materials sales were primarily due to higher caustic soda sales, partially offset by the closure of the styrene plant in December 2025.
Net sales for the PEM segment increased by $35 million in the six months ended June 30, 2026 compared to the six months ended June 30, 2025. Average sales prices for the PEM segment increased by 6% in the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, primarily due to higher polyethylene, PVC resin, caustic soda and epoxy resin sales prices. Sales volume for the PEM segment decreased by 5% in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, due to lower PVC resin, caustic soda, chlorine and styrene sales volumes. The higher Performance Materials sales were primarily due to higher polyethylene and epoxy resin sales, partially offset by lower PVC resin sales resulting from the closure of certain North American vinyl plants in December 2025. The lower Essential Materials sales were primarily due to lower chlorine sales and the closure of the styrene plant in December 2025.
Change
Income (loss) from operations 2026 2025 $ %
Second Quarter ended June 30, $ 185 $ (318) $ 503 (158) %
Six Months ended June 30, (26) (481) 455 (95) %
The increase of $503 million in income from operations for the PEM segment in the second quarter of 2026 as compared to the second quarter of 2025 was due to higher sales prices for polyethylene and PVC resin and higher sales volumes for caustic soda and epoxy resin, and lower fuel costs and ethane feedstock costs in the second quarter of 2026 as compared to the second quarter of 2025.
The decrease in loss from operations for the PEM segment by $455 million was primarily due to higher sales prices for polyethylene, PVC resin, caustic soda and epoxy resin, and higher sales volumes for polyethylene and lower ethane feedstock costs. These decreases were partially offset by higher fuel costs in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
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CASH FLOW DISCUSSION FOR THE SIX MONTHS ENDED JUNE 30, 2026 AND 2025
Cash Flows
(Amounts in table are in millions of dollars)
Six Months Ended June 30,
Change (unfavorable) favorable
Net cash provided by (used for): 2026 2025 $
Operating activities $ 224 $ 58 $ 166
Investing activities (591) (726) 135
Financing activities (704) (197) (507)
Operating Activities
The $166 million favorable change in net cash flows from operating activities in the first six months of 2026, as compared to the first six months of 2025, was mainly due to higher income, as discussed under Results of Operations above, and a favorable change attributable to the significant cash outflow in connection with the Petro 1 ethylene facility turnaround in the first six months of 2025, partially offset by unfavorable changes in working capital. The unfavorable changes in working capital in the first six months of 2026 were substantially driven by the higher accounts receivables and payable balances primarily associated with the increased operating activities during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
Investing Activities
Net cash used for investing activities in the first six months of 2026, as compared to the first six months of 2025, decreased by $135 million. The decrease was primarily due to lower purchases of available-for-sale securities in the first six months of 2026 as compared to our initial investments of $192 million in the first six months of 2025. Additionally, our capital expenditures were lower by $99 million, from $515 million in the first six months of 2025 to $416 million in the first six months of 2026. These decreases in cash outflows were partially offset by the payment of $171 million, net of cash acquired of $18 million, for the ACI and Wilhelmshaven plant acquisitions in the six months of June 30, 2026.
Financing Activities
Net cash used for financing activities during the first six months of 2026 as compared to first six months of 2025 increased by $507 million, which was primarily due to the redemption of $496 million aggregate principal amount of outstanding 3.60% 2026 Senior Notes in May 2026. Other financing activities in the first six months of 2026 included the payment of $137 million of cash dividends, $23 million of cash distributions to noncontrolling interests and the repurchase of $30 million of our outstanding common stock for treasury. The financing activities in the first six months of 2025 included $136 million payment of cash dividends, $23 million of cash distributions to noncontrolling interests and the repurchase of $30 million of our outstanding common stock for treasury.
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LIQUIDITY AND CAPITAL RESOURCES
Liquidity and Financing Arrangements
Our principal sources of liquidity are cash and cash equivalents, available-for-sale securities, cash from operations, short-term borrowings under our credit agreement and our long-term financing.
In November 2014, our Board of Directors authorized a $250 million stock repurchase program (the "2014 Program"). In November 2015, our Board of Directors approved the expansion of the 2014 Program by an additional $150 million. In August 2018, our Board of Directors approved the further expansion of the existing 2014 Program by an additional $150 million. In August 2022, our Board of Directors approved the further expansion of the existing 2014 Program by an additional $500 million. There were repurchases of 355,721 common stock under the 2014 Program during the three months ended June 30, 2026, for an aggregate purchase price of $30 million under the 2014 Program. As of June 30, 2026, we had repurchased 10,285,404 shares of our common stock for an aggregate purchase price of approximately $727 million under the 2014 Program. Purchases under the 2014 Program may be made either through the open market or in privately negotiated transactions. Decisions regarding the amount and the timing of purchases under the 2014 Program will be influenced by our cash on hand, our cash flows from operations, general market conditions and other factors. The 2014 Program may be discontinued by our Board of Directors at any time.
On October 4, 2018, Westlake Chemical Partners LP ("Westlake Partners") and Westlake Chemical Partners GP LLC, the general partner of Westlake Partners, entered into an Equity Distribution Agreement with UBS Securities LLC, Barclays Capital Inc., Citigroup Global Markets Inc., Deutsche Bank Securities Inc., RBC Capital Markets, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC to offer and sell Westlake Partners common units, from time to time, up to an aggregate offering amount of $50 million. This Equity Distribution Agreement was amended on February 28, 2020 to reference a new shelf registration and subsequent renewals thereof for utilization under this agreement. No common units have been issued under this program as of June 30, 2026.
We believe that our sources of liquidity as described above are adequate to fund our normal operations and ongoing capital expenditures and turnaround activities. Funding of any large expansions or potential future acquisitions or the redemption of debt may necessitate, and therefore depend on, our ability to obtain additional financing in the future. We may not be able to access additional liquidity at favorable interest rates due to volatility of the commercial credit markets.
Cash and Cash Equivalents and Available-For-Sale Securities
As of June 30, 2026, our cash and cash equivalents totaled $1,643 million.
As of June 30, 2026, our available-for-sale securities totaled $209 million. See Note 3 "Financial Instruments" to the unaudited consolidated financial statements appearing elsewhere in this Form 10-Q for a discussion of our available-for-sale securities.
In addition to our cash and cash equivalents and available-for-sales securities, our credit agreement is available to provide liquidity as needed, as described under "Debt" below.
Debt
As of June 30, 2026, the carrying value of our indebtedness totaled $5,067 million. See Note 8 "Long-Term Debt" to the unaudited consolidated financial statements appearing elsewhere in this Form 10-Q for more information on our long-term indebtedness, credit agreements and defined terms used in this section.
Our ability to make payments on our indebtedness and to fund planned capital expenditure will depend on our ability to generate cash in the future, which is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. Based on our current level of operations and unless we were to undertake a new expansion or large acquisition, we believe our available cash and available borrowings under our credit agreement will be adequate to meet our normal operating needs for the foreseeable future. In order to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption, we or our affiliates may from time to time seek to redeem, repurchase or otherwise acquire our outstanding debt securities through open market purchases, privately negotiated transactions, tender offers or pursuant to the terms of such securities. Such acquisitions, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.
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Senior Notes
On May 29, 2026, the Company redeemed all $496 million aggregate principal amount of its outstanding 3.60% 2026 Senior Notes at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued and unpaid interest through the redemption date.
The holders of the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 tax-exempt GO Zone Refunding Senior Notes, the 5.550% 2035 Senior Notes, the 2.875% 2041 Senior Notes, the 5.00% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes, the 6.375% 2055 Senior Notes and the 3.375% 2061 Senior Notes may require us to repurchase the notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to, but not including, the date of repurchase, upon the occurrence of both a "change of control" and, within 60 days of such change of control, a "below investment grade rating event" (as such terms are defined in the respective indentures governing these notes).
The indenture governing the 1.625% 2029 Senior Notes, the 3.375% 2030 Senior Notes, the 3.50% 2032 tax-exempt GO Zone Refunding Senior Notes, the 5.550% 2035 Senior Notes, the 2.875% 2041 Senior Notes, the 5.00% 2046 Senior Notes, the 4.375% 2047 Senior Notes, the 3.125% 2051 Senior Notes, the 6.375% 2055 Senior Notes and the 3.375% 2061 Senior Notes contains customary events of default and covenants that, among other things and subject to certain exceptions, restrict us and certain of our subsidiaries' ability to (1) incur certain secured indebtedness, (2) engage in certain sale and leaseback transactions and (3) consolidate, merge or transfer all or substantially all of our assets.
As of June 30, 2026, we were in compliance with all of our long-term debt covenants.
Credit Agreement
On June 9, 2022, we entered into a $1.5 billion revolving credit facility that was scheduled to mature on June 9, 2027 (the "Credit Agreement"). On April 2, 2026, the Company entered into a credit agreement (the "New Credit Agreement"), by and among Westlake, the lenders from time-to-time party thereto (collectively, the "Lenders"), the issuing banks party thereto and JPMorgan Chase Bank, National Association, as administrative agent. Under the New Credit Agreement, the Lenders have committed to provide an unsecured revolving credit facility in an aggregate principal amount of up to $1.5 billion. The new revolving credit facility replaced Westlake's previous $1.5 billion revolving credit facility, which was terminated on April 2, 2026. The New Credit Agreement became effective on April 2, 2026 and borrowings thereunder will mature on April 2, 2031. The New Credit Agreement contains customary affirmative and negative covenants, including a quarterly total leverage ratio financial maintenance covenant ("financial covenant"). The calculation of the financial covenant includes, among other items, certain adjustments and add backs to debt and EBITDA definitions in the credit agreements.
As of June 30, 2026 we had no borrowings or letters of credit outstanding, had borrowing availability of $1.5 billion, under the Credit Agreement, and were in compliance with the financial covenant under the Credit Agreement.
Westlake Chemical Partners LP Credit Arrangements
Our subsidiary, Westlake Chemical Finance Corporation, is the lender party to a $600 million revolving credit facility with Westlake Chemical Partners LP ("Westlake Partners") (the "MLP Revolver") that is scheduled to mature on July 12, 2027. As of June 30, 2026, outstanding borrowings under the credit facility totaled $377 million and bore interest at Secured Overnight Financing Rate, as administered by the Federal Reserve Bank of New York ("SOFR") plus the Applicable Margin plus a 0.10% credit spread adjustment. On July 12, 2022, Westlake Partners entered into the Fourth Amendment (the "MLP Revolver Amendment") to the MLP Revolver. The MLP Revolver Amendment, among other things, extended the maturity date to July 12, 2027 and provided for the replacement of LIBOR with SOFR. Borrowings under the MLP Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the MLP Revolver varies between 1.75% and 2.75%, depending on the Partnership's Consolidated Leverage Ratio.
Our subsidiary, Westlake Polymers LLC, is the administrative agent to a $600 million revolving credit facility with Westlake Chemical OpCo LP ("OpCo") (the "OpCo Revolver") that is scheduled to mature on July 12, 2027. As of June 30, 2026, outstanding borrowings under the credit facility totaled $23 million and bore interest at SOFR plus the Applicable Margin of 1.75% plus a 0.10% credit spread adjustment. On July 12, 2022, OpCo entered into the Second Amendment (the "OpCo Revolver Amendment") to the OpCo Revolver. The OpCo Revolver Amendment, among other things, extended the maturity date to July 12, 2027, and provided for the replacement of LIBOR with SOFR. Borrowings under the OpCo Revolver now bear interest at a variable rate of either (a) SOFR plus the Applicable Margin plus a 0.10% credit spread adjustment or, if SOFR is no longer available, (b) the Alternate Base Rate plus the Applicable Margin minus 1.0%. The Applicable Margin under the OpCo Revolver is 1.75%.
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On July 8, 2026, our subsidiary, Westlake Polymers LLC, entered into an amendment to the OpCo Revolver and our subsidiary, Westlake Chemical Finance Corporation, entered into an amended to the MLP Revolver, which extended the maturity dates of the OpCo Revolver and the MLP Revolver and removed the 0.10% credit spread adjustments that had previously applied to the SOFR-based interest rates under the OpCo Revolver and the MLP Revolver. The OpCo Revolver and the MLP Revolver are now scheduled to mature on July 11, 2031.
We consolidate Westlake Partners and OpCo for financial reporting purposes as we have a controlling financial interest. As such, the revolving credit facilities described above between our subsidiaries and Westlake Partners and OpCo are eliminated from the financial statements upon consolidation.
Off-Balance Sheet Arrangements
None.
Recent Accounting Pronouncements
See Note 1 "Description of Business and Basis of Presentation" to the unaudited consolidated financial statements included in Item 1 of this Form 10-Q for a full description of recent accounting pronouncements, including expected date of adoption and estimated effect on results of operations and financial condition.
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FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Certain of the statements contained in this report are forward-looking statements. All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, project, believe or anticipate will or may occur in the future are forward-looking statements. Forward-looking statements can be identified by the use of words such as "believes," "intends," "may," "should," "could," "anticipates," "expected" or comparable terminology, or by discussions of strategies or trends. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we cannot give any assurances that these expectations will prove to be correct. Forward-looking statements relate to matters such as:
•the ultimate timing, outcome and results of integrating the operations of any acquisitions and the ultimate outcome of our operating efficiencies applied to the products and services; the effects of any such acquisition, including the combined company's future financial condition, results of operations, strategies and plans; and expected synergies and other benefits from any such acquisition and our ability to realize such synergies and other benefits;
•recoverability of the carrying value of our long-lived assets, including tangible assets and intangible assets with finite lives, and the fair value of our reporting units with goodwill;
•future operating rates, margins, cash flows and demand for our products;
•industry market outlook, including the price of crude oil, natural gas, ethane, housing starts and repair and remodeling activity;
•macroeconomic outlook, including elevated interest rates, inflation and possible recession;
•widespread outbreak of an illness or any other communicable disease, or any other public health crisis;
•production capacities;
•the impact of the ongoing conflict in the Middle East and other global conflicts on our operations and margins;
•currency devaluation;
•our ability to borrow under our credit agreement;
•our ability to meet our liquidity needs;
•our ability to meet debt obligations under our debt instruments;
•our intended quarterly dividends;
•future capacity additions and expansions in the industries in which we compete;
•timing, funding and results of capital projects;
•pension plan obligations, funding requirements and investment policies;
•compliance with present and future environmental regulations and costs associated with environmentally related penalties, capital expenditures, remedial actions and proceedings, including any new laws, regulations or treaties that may come into force to limit or control carbon dioxide and other greenhouse gas emissions or to address other issues of climate change;
•recovery of losses under our insurance policies;
•effects of pending legal proceedings and settlements;
•timing of and amount of capital expenditures;
•increased costs and other effects of tariffs, antidumping duties, or other trade remedies imposed by the U.S. government or other governments, and any effects on trading relationships among the United States and other countries; and
•results of the closures of certain of our facilities, including the units located in Pernis, Netherlands, certain of the North American chlorovinyls production assets located in Louisiana and Mississippi, and the styrene production plant located in Louisiana (such as the timing and amount of recognition of related costs and our expectations regarding our financial performance following such closures).
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We have based these statements on assumptions and analyses in light of our experience and perception of historical trends, current conditions, expected future developments and other factors we believe were appropriate in the circumstances when the statements were made. Forward-looking statements by their nature involve substantial risks and uncertainties that could significantly impact expected results, and actual future results could differ materially from those described in such statements. While it is not possible to identify all factors, we continue to face many risks and uncertainties. Among the factors that could cause actual future results to differ materially are the risks and uncertainties discussed under "Risk Factors" in the 2025 Form 10-K and those described from time to time in our other filings with the SEC including, but not limited to, the following:
•general economic and business conditions, including inflation, interest rates and possible recession;
•the cyclical nature of the chemical and building products industries;
•the availability, cost and volatility of raw materials and energy;
•uncertainties associated with the United States, European and worldwide economies, including those due to political tensions and conflict in the Middle East, between Russia and Ukraine and elsewhere;
•uncertainties associated with pandemic infectious diseases;
•uncertainties associated with climate change;
•the potential impact on demand for ethylene, polyethylene and polyvinyl chloride due to initiatives such as recycling and customers seeking alternatives to polymers;
•current and potential governmental regulatory actions in the United States and other countries;
•industry production capacity and operating rates;
•the supply/demand balance for our products;
•competitive products and pricing pressures;
•instability in the credit and financial markets;
•access to capital markets;
•compliance with financial covenants;
•terrorist acts;
•operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, delays in turnaround activities, labor difficulties, transportation interruptions, spills and releases and other environmental risks);
•changes in laws or regulations, including trade policies and tariffs;
•disruptions in global trade, including as a result of tariffs, trade restrictions, retaliatory trade measures or the effect of such actions on trading relationships;
•the effects of government shutdowns;
•technological developments;
•information systems failures and cyberattacks;
•foreign currency exchange risks;
•our ability to implement our business strategies; and
•creditworthiness of our customers.
Many of such factors are beyond our ability to control or predict. Any of the factors, or a combination of these factors, could materially affect our future results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels. Every forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements.
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