Everyone. Mike Sison again at Wells Fargo. A quick one on chemicals again. The group has continued to outperform, up 14% year- to- date. Westlake has kept pace. It is up about 15%. Today we have Steve Bender, EVP and CFO, Westlake, to tell us why he is going to keep that movement going. Steve, thanks for spending some time with us today. Let us start with the Iran conflict war. What do you think the impact has been on your biggest business, chlor-alkali and vinyls? There is not a lot of capacity per se in the Middle East, less than 3%, as I recall, for global capacity. A lot of supply does go through the Strait of Hormuz. 70% of China is coal based, the rest is naphtha based, which could be affected by the impact. I wanted to start there and get your general thoughts. If you have any opening comments, feel free. It is a really good question. As you said, about 3%-5% of global capacity in PVC is really centered around the Persian Gulf. Not as large an impact as you have seen in polyethylene, which is about 15%, that has been impacted. What has been impacted really is the oil supply and therefore naphtha supply coming out of the Gulf. With the strait still closed, the ability to get naphtha, an oil derivative coming out of the Gulf into markets such as Europe and to Asia, has caused naphtha prices to go quite high. We use oil price as an analog to really compare that. As a consequence, cost to manufacture PVC has gone significantly higher. As a result, those of us that are really largely focused in production in the North American market, in our case, over 85% of our production really is based out of the U.S. Consequently, our costs have really not shifted, our competitors' costs have. Therefore, we have been able to benefit from the improvement in pricing we have seen as a result of this conflict. We have seen pricing initiatives really starting in January and obviously accelerate since the conflict arose, as a result of the conflict in March, April, and through even June. We have seen inputs cost rise, therefore the value really be beneficial to us. The headwind we have seen really is, as everybody knows, the affordability in construction, because PVC is really tied to the construction markets. Here we are in the second quarter. We actually have seen some improvement in volume, as you would guess, seasonally. Not probably quite as much seasonal improvement from 1 Q - 2Q. It is normal seasonality because of some of the affordability issues that everybody's familiar with. Nevertheless, we've seen some meaningful improvement in the infrastructure side of our business. When I say infrastructure, I'm talking about really the PVC resin that's going into PVC pipe, our large diameter pipe business, our large fittings business, and actually into some of the repair and remodeling business in our housing and infrastructure businesses. Even though we have naturally exposure to new start construction, I have to remind people that half of our business really is tied to infrastructure and repair and remodeling, which actually is seeing some meaningful improvement. Let's dig in a little bit on PVC. The industry's achieved about $0.11 per pound this year despite weak demand. May was flattish by the consultants. How do you see pricing? How do you see margins going forward? Maybe just a thought on demand. A little bit more color on demand. One of the consultants, CMA, has called it flat, but I would say one of the other consultants called it up $0.02. That up $0.02 is actually what we realized in the month of May. I do not have a current price announcement out for price increases in June, but to your point, really going back to the beginning of January, we've actually seen prices increase between $0.13 and $0.14 a pound in PVC. When you think of back to my comments about naphtha prices rising, we haven't fully seen the full benefit of that price that our competitors are facing in naphtha. The European producer and the Asian producer are seeing that higher price of naphtha, and that higher price of naphtha should translate into higher price of PVC. Since again, we're a natural gas-based, ethane-based feedstock in North America for most of our PVC, I am benefiting from that. I've also seen price increases really in caustic soda. When you think about caustic soda since the beginning of this year, we've seen about $75 a ton increase. It's been both improvement both on the PVC front, but of course, a byproduct of making chlorine going into PVC has been caustic soda. The other side of our benefit that we're seeing in the marketplace is not only the improvement in PVC pricing, which is clear, we've also seen improvement in caustic soda. Demand for caustic has actually been pretty good so far this year. Otherwise, we wouldn't have been able to achieve that $75 a ton increase. We announced a total of $140 a ton price increase earlier this year. $65 we announced in December for the first quarter, and $75 we announced for the second quarter. We've already achieved $75 of that $140 price increase, and you can't do that unless you see pretty good demand. We're continuing to push forward with the rest of those price increases. Right. When you think about caustic demand heading into the rest of the year, as I recall, it's more industrial related, pulp and paper- Alumina Alumina. I think demand there has been better recently. Any thoughts on the demand trends there versus the chlorine side, which is weaker? Yeah. The industrial side, the alumina, the container board paper, have all been supportive of the price increase that we've announced. As I said, you can't get those price initiatives unless you have reasonably good industrial demand, and we are. I would say it's this time of the year where you begin to see water treatment demand pick up as the North American market begins to see its time going into the summer. Begin to see water treatment, whether it is pool water, drinking water of all sorts. You typically see an improvement in chlorine demand and chlorine pricing. Typically, as you see improvement in chlorine demand and chlorine pricing, you tend to see some offset in caustic pricing. Actually, so far, we've not seen that headwind in caustic pricing. We have seen that slight uptick in chlorine pricing and chlorine demand. At this stage, I'd say the stronger side of the ECU, the electrochemical unit, is on the caustic side. We certainly will see some improvement in chlorine pricing as we get later into the summer, given the normal heating season during the course of the year, where that heat begins to need more water treatment in pool water and drinking water. Right. Excuse me. Following up on, in epoxy business, EDC has improved in terms of pricing. It kind of went up a lot, and it's still up a lot relative to the beginning of the year at $100 per ton. I think it's in the low twos, peaked at three. Just any thoughts on epoxy EDC, and you're a little bit more downstream on an epoxy than others. Just any thoughts on if that business is improving profitability demand? EDC is improving because PVC demand is improving. We're an integrated producer going from salt and ethane and ethylene all the way through EDC, VCM, and PVC. It's a complicated manufacturing process just to make one pound of PVC. The demand for EDC has improved because the demand for PVC has improved. As we think about the opportunity to use further EDC in our business, many of you are aware that we have publicly announced we have a non-binding offer to acquire an asset in Northern Germany. This is an asset owned right now by the bankruptcy courts in Germany, previously owned by Vynova. It sits on the North Sea coast and immediately adjacent to a deep water dock where we could import EDC into that dock from the North American market, make VCM and PVC at that site, and probably be the lowest cost producer of PVC in Europe. Still working with the bankruptcy courts, as I say, this is a non-binding offer at this stage, still working with the bankruptcy courts to see if we can conclude an acquisition of that site. If we're successful in doing so, it would make us a very strong competitor in the European market, therefore pulling EDC out of the North American market. We're a long EDC in the United States and can move that EDC into that site in Germany, manufacture VCM, PVC, as I say, be a very competitive player in that marketplace. When we think of the epoxy market, the epoxy market has improved for us, and the strategy to do so is to go further into formulated specialty epoxy materials. Many of you may be aware that we are integrated upstream in liquid epoxy resin with a site in Rotterdam last year. That is a challenging business in making liquid epoxy resin in the European markets. We chose to shutter that plant last year. The entire epoxy business for us last year was losing over $100 million a year last year, and that business has completely turned around. It is profitable now and going forward because of the shuttering of that loss-making Rotterdam plant. Now what we have is a very highly specialized, formulated epoxy business centered not only in Europe, but also in North America and in Asia. Because we are now buying feedstocks to make those specialty materials out of markets that are more cost competitive than manufacturing it in Europe, it allows us to be quite profitable in our epoxy business. We actually have turned that epoxy business completely around by shuttering that loss-making upstream liquid epoxy resin plant in Rotterdam. I expect it to remain really continually to be a very nice, profitable business as we go forward. It's quite clear that the Asian markets, China, South Korea, Taiwan, and Thailand, have overproduced in liquid epoxy resin. The feedstocks make those specialties, and as long as they are long in that market, and I expect them to be for a good period of time, it's more cost effective to buy that material and use it in our downstream materials and remain really a nicely profitable business in that epoxy business. I'm very pleased with the transformation of that business over the last year. Got it. Because of the trough the last several years, you guys have focused on reducing costs, like a lot of companies, reducing some capacity. You took 10% of the U.S. capacity out in chlor-alkali and vinyls last year. Most of that was designed for export. I know we've talked about this a little bit, PVC export has improved a little bit. Do you feel really good about that decision despite some of the improvements in the PVC margin area? Maybe just talk about what would you do if demand does turn around and you need new capacity? Yeah. Just to refresh everybody, we shuttered six plants last year. All of those plants were export-oriented. We shuttered a PVC site in China that was export-oriented, three North American-based PVC integrated sites last year, shuttered a styrene plant, and also shuttered the Rotterdam-based epoxy plant. A total of six plants that were shuttered this past year, all loss-making, and therefore, as we think about prospectively the rest of this year and moving forward, still very pleased with that decision to shutter those sites. As I said, the export market for those materials, epoxy, styrene, and PVC, were all under economic stress. Even as we think about in price improvements this year, many of which are being driven by the conflict in the Middle East, those sites would still be quite economically challenged. I'm quite pleased with the decision that we made last year and prospectively to see the business really fundamentally pivot. Part of our cost reduction initiatives. We've talked very publicly about our $600 million path to really structurally improve our cost structure. A piece, or I'd say one of those three pillars to improve our cost structure was to really improve the footprint optimization. I think of structural savings of $200 million related to the site optimizations that we took the step toward last year. Well on our way to achieving that. I see no reason why we won't achieve that $200 million of that pillar for optimization. Another piece of that pillar was really cost improvement, structural cost reductions, $200 million as well, well on our way to achieving that $200 million savings. The third pillar of that initiative, which was a total of $300 million, was improved operability and reliability of our plants. I fully expect that we'll achieve that as well. When we think about the three pillars, reliability, footprint optimization, and cost reductions that are structural in nature of all of those total $600 million, I'm very pleased to say that we're well on our way to achieving that. In the first quarter, we announced $150 million of cost savings related to those three pillars. A quarter pro rata, and I expect to achieve the other three quarters of that later this year as we go forward. I fully expect to achieve those structural savings. Great. Going to your last sort of big area in PEM, polyethylene. Dow just noted a little bit upside in their guidance. I know you don't give guidance. Because of the polyethylene increase in April, the industry has achieved about $0.40 per pound thus far. You all have $0.10. Dow said $0.20 for May. Maybe just talk about that business a little bit. It's obviously the most tight with the war. Maybe comment on demand and then how you see pricing unfolding. Yeah. As a polyethylene producer, it's one of our smaller businesses, but nevertheless, an important piece of our business. We're a specialty player in polyethylene, unlike some of the other players. You mentioned Dow, but others are more commoditized-oriented, they're more into the high density and linear. We're a specialty player in low density, which has over 125 grades, whereas the commodities tend to have five to six grades each for high density and linear low density. You're right, with the conflict in the Middle East and the Straits being closed, that has kind of constricted about 15% of global production capacity of polyethylene. With demand remaining so far reasonably good and having pulled 15% of that capacity offline with the Strait being closed, you're right, pricing has moved up. We saw $0.10 in March increase, a $0.30 April increase, May actually settle flat. A total of $0.40 really with March and April. We have $0.10 announced for June, I think others have got $0.10. Some others have higher prices, I understand, from some that are as high as $0.20 a pound for June. I would say that we've seen converters announce price increases, they announce price increases on a percentage basis versus our per pound price increases. I would say our customers, our converter customers, have announced price increases that would reflect our $0.40 price increase that have been announced so far. I have not seen a subsequent price announcement by our customers for that June increase that I mentioned that we have nominated $0.10. I would say demand still remains pretty solid. We've not seen a pullback in the applications that we are addressing. Again, we're more of a specialty producer of low density polyethylene, the more clarity form that you see in food packaging. Typically, in markets like this, people don't pull back on food packaging. As a consequence, I do expect that we'll move forward, and it remains to be seen. It's still early days in June, whether we'll get this $0.10 price increase for June. I would say the $0.40 that we see is quite sticky, our converter customers have already announced the price increases, would suggest that they'll be able to pass our cost through downstream into their customers. I remain confident that we'll continue to see that demand remain good and firm. Again, we're not focused as so much on the commoditized, I can't speak to the high density, which we do not make, and the linear low density that we do make. That market, even though it's a smaller piece of our overall polyethylene portfolio, that market remains also reasonably good. As you know, I live in New Orleans, food is definitely in high demand there. I agree with that. Steve, if I were to paraphrase 2Q, you don't give specific guidance, but when I think about what you've said, polyethylene maybe relative to when you report it seems a little bit better in terms of pricing. Caustic seems maybe a little bit better in terms of demand. You got a little bit of PVC pricing. Do you think PEM is feeling better as you head into 2Q based on at least the pricing actions that you've seen? When you think of the actions that we've taken since the beginning of the year with price initiatives in PVC, polyethylene, caustic, and epoxy. Epoxy. I would say that most of the impact of that will be certainly in 2Q, 3Q, and 4Q as we go forward because those price initiatives that we announced in PVC and in polyethylene in January and February were really offsetting the concessions we made to customers as we renegotiated contracts the end of December. While in PVC we gave up $0.03-$0.04 in PVC in December, we got that back in January and February. In polyethylene, we gave up $0.04-$0.05, we got that back in January. Realistically when you think of the average price for our products in the first quarter, they were actually on average lower than they were in the fourth quarter of last year. As we march forward into Q2, Q3, and Q4, I would expect the price announcements that we have been successful in achieving so far would have significant benefits relative to what we saw in Q1. You're right, I do expect that we'll have the full impact of these price announcements in epoxy, caustic, PVC, and polyethylene be beneficial in Q2 and very likely in Q3 and Q4. Great. Just a reminder, people on the webcast, I am live on Bloomberg if you want to ask me a question or ask Steve a question. Shifting gears to HIP, a lot of concerns. You saw Sherwin-Williams go after AkzoNobel kind of makes me wonder if housing is that bad. Maybe give an update there. You've talked about the infrastructure side of pipe and fittings doing a little bit better. Maybe just your thoughts on HIP as we head into 2Q, relative to what we've seen. Yeah. Where we see ourselves, remembering that in our Housing and Infrastructure Products business that we call HIP, it's roughly half new starts and half repair and remodeling. When you think about the benefit we're seeing today is substantially in what I would call the repair and remodeling and the infrastructure side of our business. When you think of infrastructure, think of our large diameter pipe and fittings business, this is a market that has relatively consolidated. There are really only nationwide only three players, and we're one of the largest players, actually the largest player in large diameter pipe in the markets in which we operate. When you think of the congressional bill that was passed about four years ago of $55 billion for water, you're beginning to really see cities and counties move forward with those spending initiatives. Storm water, fresh water, and waste water is really where we're seeing the pull on large diameter pipe. That infrastructure business of ours is really seeing the pull therefore, and that pull is not only on pipe but of also PVC resin since we're integrated, taking a significant portion up to 30%, 35% of our PVC resin from PEM into our HIP segment to make PVC pipe and PVC fittings and selling that into the infrastructure market. As I've mentioned also, it seems as though data centers as much in the conversation these days. Those data centers need power. Most of that power is natural gas-fired, and we're actually seeing a lot of cooling water, therefore pipe going into cooling water for these data centers. I would say over the last two quarters, Q1 and so far in Q2 that probably mid-to-high teens percentage of our pipe shipments and orders have all been related to cooling water needed for the data centers. We're beginning to see that spend begin to occur to address some of the build-out we're seeing in that market. I would say the repair and remodeling business, not only in pipe and fittings, but also remember in the siding and trim has also been nice and firm. While we see some headwinds naturally in new construction activity given the infrastructure around the country, we see continued spending really in repair and remodeling. While repair and remodeling tends to have a smaller volume when you think of siding and trim and roofing material, it has much higher margins. What you may give up in volume, you maybe get back in margins. What we're seeing is repair and remodeling not only in our exterior building products business but also in the pipes and fittings business going largely into infrastructure. You do give full year guidance for HIP, $4.4 billion-$4.6 billion in sales, EBITDA margin range of 19%-21%. You've hinted that you'd be toward the lower end of the range. That was a change from, I guess, the prior outlook. How do you feel about sort of the outlook this year from what you've seen thus far in 2Q? The reason for the guidance to be on the low end of the 19%-21% EBITDA margin was the fact that going back to my comments about the price initiatives specifically in PVC since we're providing PVC, as I said, a third to 35% of that PVC resin is going from our PEM business into our HIP business. There is naturally some headwind that the HIP segment may see as we push that pricing of PVC resin through into our HIP segment. As a consequence, there could be some risk of margin compression in the first portion of the second quarter as we push that resin price in to make siding, trim, pipe, and fittings. But as we get into the latter portion of the second quarter and into the third quarter, I do expect that margin to therefore normalize. Therefore, the reason for that guidance, and this is full-year guidance, is to suggest that we could see some challenges in that margin just as we push that higher resin cost through from PEM into HIP. Remember, I make much more volume in PEM than I do in HIP, so the tailwind that we see with PVC pricing will more than outstrip the benefits that it would otherwise have achieved in HIP. While I may see some margin compression in HIP, I should see just the reverse, really, in PEM because those prices for PVC will, from a volume perspective, outstrip since it's only about a third of our resin going into HIP. Right. A lot of investors ask me about mid-cycle EBITDA for PEM. SpaceX is going public. They're losing money. Clearly investors want to look forward given it's going to get a $1.7 trillion. Maybe either lose money and then tell us about The question really is, when I look back, there doesn't ever seem to be a mid-cycle sorry, the trough or peak. You guys had a peak of $4.1 billion in PEM between third quarter 2021 and second quarter 2022. 2025 was $267. I guess first, what do you think the structural trough should be and then where could the next peak be for PEM? When we think about the earnings capacity really of our PEM segment, I think you can illustrate from your comments, you can see the strength that we've been able to demonstrate in the past. While we don't give specific guidance on earnings capacity of PEM, I would say that when you look across the build-out of these various products, whether it's epoxy, whether it is PVC and its inputs such as caustic and chlorine or the PVC business, so PVC, epoxy and caustic, and polyethylene. Where you really don't see is meaningful global capacity happening in the chlor-vinyl space, chlorine, caustic and PVC globally. That happens to be the largest piece of our overall PEM segment. With this market really, and this chlorovinyls business as I call it, really tied to global GDP, it really is tied about one times growth of global GDP. As we see really almost no meaningful global capacity add in chlorovinyls over the next many years, I see the ability for supply and demand to begin to kind of converge. That's really what we saw going back several years ago, Mike, was the strength in our chlorovinyls business really having really a supply and demand dynamic that was reasonably snug. As we see no global capacity add in chlor-vinyl again over the next several years, I see supply and demand beginning to converge and the earnings ability for that business to really come through and be quite strong. I'd say in the polyethylene space, there's still capacity being added. If you look at the consult reports coming out of CMA or others, such as S&P, you would see that there's still additional capacity in polyethylene yet to come, and that market could be long for a number of years still to come. Fortunately for us, it's a much smaller component of our overall business, chlor-vinyls being the great majority of our business. On the epoxy front, again, that market has already been overbuilt in Asia by the Chinese, the South Koreans, the Taiwanese and the Thais, I don't see a lot of incremental capacity there either. That market tends to grow at a multiple of global GDP. I would say that in the relatively near term, 2026, 2027, 2028, I see the chlor-vinyls business getting supply-demand wise much snugger and earnings therefore improving proportionately. Polyethylene, I think that could be a longer market for a period of time, but again, it represents a very small piece of our overall PEM segment. In epoxy, we're already profitable and that market should get snugger as we go forward over the next several years. I really see the trough that we've been in beginning to improve very meaningfully over the course of the next several years. It'll be very product specific in terms of how we see this cycle play through because some of those products have got capacity adds and others do not. When you think of Westlake's business, it's challenging to compare us to really some of the players that may have been in here earlier, such as Dow, because they are really concentrated more on the more polyethylene commodity side where we're really focused really on the chlor-vinyls space. When you think of our business, likely with no capacity additions of size over the next several years, our business should begin to really see a much better supply-demand dynamic over the next several years coming. Right. Just two last questions from the webcast. Number one on PEM, you've built the business on some acquisitions. How's the pipeline there? The acquisitions there have been very good additive. Are there opportunities there to grow and then where do you think you want this business to be maybe by the end of the decade? As we look at the growth of the PEM segment, we've grown, you're right, through acquisition but also organically. I'd say as we look forward, I mentioned this non-binding offer that we have to acquire a PVC site in Europe. We'll continue to look for investment opportunities that have a really strong return opportunity and we'll pursue those on the PEM side of our business. This one that I just mentioned is a good one. We'll see if we can work with the bankruptcy court to draw that to a conclusion. It's very possible we could do so, we'll also look for other opportunities globally. Where our focus really is to be highly integrated and very much on the low end of the cost curve. If we find those opportunities, we'll pursue them. If not, we'll look for other ways to grow the business outside of PEM. If we can't find those, we'll return the capital back to shareholders. The final question, just following up on that, just thoughts on free cash flow this year. Is it going to be better based on the improvement in EBITDA that you're seeing? Just any thoughts on capital allocation and balance sheet? I do expect that the free cash flow would be significantly stronger this year, certainly with improved earnings, improved savings initiatives. I just mentioned the $600 million savings initiative that we have that we're well underway with and fully expect to land. Certainly managing, I think our capital spend for the projects that we have. I think that capital will continue to be, the free cash will be much improved this year. As we think about deploying it, certainly running the plants reliably in terms of maintenance, but also looking for growth opportunities that are value added. Also returning that in the form of dividends and share buybacks is certainly part of our mindset as well. I expect to pursue all three of those areas over the course of this year and next for that matter. Great. Unless you have any closing comments, thank you very much and hopefully we'll see you in one of these fancy jackets next year. Well, thank you very much, Mike. Thank you very much for your attention for Westlake. Thank you.