Westlake Corporation, a leading chemicals and building materials company, posted mixed results for the fourth quarter of 2024, with its building products segment continuing to perform robustly while its chemicals business faced significant challenges. The Houston-based Fortune 500 company saw a record performance from its Housing and Infrastructure Products (HIP) division, but a decline in its Performance and Essential Materials (PEM) segment led to a slight earnings miss.
Despite broader economic uncertainty, particularly in the U.S. housing market, Westlake benefited from strong demand for building materials, as its HIP segment, which provides materials for homebuilding and infrastructure projects, experienced a fourth consecutive year of growth. HIP revenue reached $981 million in the quarter, marking a 4% increase from the previous year, and slightly exceeding Wall Street expectations. This division continues to be a solid foundation for the company, with CEO Jean-Marc Gilson highlighting its significant growth potential.
“The HIP segment has been a very stable foundation for the company with significant growth potential,” Gilson said in a call with analysts. “2024 was another record year for HIP, with amazing sales and earnings growth.” North America remained a bright spot, with demand staying relatively strong in both segments, despite broader economic challenges.
However, Westlake’s performance in its PEM segment, which produces chemicals used in a variety of products such as car interiors and PVC pipes, did not meet expectations. The division recorded a 1% drop in revenue, bringing in $1.86 billion, which was 5% lower than anticipated. The decline was attributed to weaker pricing for key materials, including chlorine, PVC resin, and polyethylene. PEM also posted a loss from operations of $41 million in the quarter, highlighting the ongoing difficulties the division faces.
Despite these challenges, Gilson expressed optimism for a rebound in the PEM sector. “We see PEM as being in a bit of a trough situation right now,” he remarked, suggesting that as market conditions improve, the division would generate strong cash flow and EBITDA growth.
The company’s overall fourth-quarter revenue rose to $2.84 billion, slightly higher than the previous year, but still falling short of Wall Street’s projections. Analysts had concerns about potential headwinds in the housing market, particularly in light of the Federal Reserve’s monetary policy. However, CFO Steve Bender remained confident, pointing to the long-term housing supply gap in the U.S. as a key driver of continued demand. “Housing-industry consultants forecast that housing starts for 2025 will be similar to 2024 at 1.3 million,” he stated.
In light of its mixed performance, analysts have noted that the market may be undervaluing Westlake’s overall business, particularly given the strength of its HIP division. Bender remarked that investors were effectively “getting the PEM side of the business for free,” suggesting that Westlake’s valuation remains lower than many of its chemical-industry peers despite its strong performance in the building products market.
Looking ahead to 2025, Westlake expects revenue from its HIP segment to range between $4.4 billion and $4.6 billion, underscoring the company’s optimism regarding continued growth in the housing market. “We are optimistic on the outlook for our HIP segment, underpinned by the need to expand the supply of residential housing in the U.S. after over 15 years of under-building to support population growth and resulting housing demand,” Gilson said.
Following the earnings report, shares of Westlake Corporation saw a 2% increase, rising to around $102, reflecting investor confidence in the company’s long-term prospects despite challenges in its chemicals division.
