Westlake Corporation 10-Q Summary: Q2 2026
Business Context and Reporting Period
Westlake Corporation (WLK) is an integrated global manufacturer of housing and infrastructure products and performance and essential materials. This report covers the quarterly period ended June 30, 2026. The Company operates two principal segments: Housing and Infrastructure Products (HIP) and Performance and Essential Materials (PEM).
Key Financial Metrics
| Metric | Q2 2026 | Q2 2025 | 6M 2026 | 6M 2025 |
|---|---|---|---|---|
| Net Sales | $3,271M | $2,953M | $5,923M | $5,799M |
| Gross Profit | $652M | $258M | $764M | $490M |
| Gross Margin | 20.0% | 8.7% | 12.9% | 8.5% |
| Operating Income | $364M | ($109M) | $192M | ($141M) |
| Net Income (Attributable to WLK) | $260M | ($142M) | $91M | ($182M) |
| Diluted EPS | $2.01 | ($1.11) | $0.70 | ($1.42) |
| Operating Cash Flow | $318M (Q2) | $135M (Q2) | $224M (6M) | $58M (6M) |
| Free Cash Flow | $111M (Q2) | ($132M) (Q2) | ($192M) (6M) | ($457M) (6M) |
| Total Debt (Carrying Value) | $5,067M | $5,584M | $5,067M | $5,584M |
| Cash & Equivalents | $1,643M | $2,724M | $1,643M | $2,724M |
Material Changes vs. Prior Period
- Profitability Turnaround: The Company reported a net income of $260M in Q2 2026, a significant improvement from a net loss of $142M in Q2 2025. This was driven by higher sales prices for polyethylene and PVC resin, increased volumes in pipe and fittings, and lower feedstock costs.
- Restructuring Costs: Restructuring, transaction, and integration costs dropped significantly to $3M in Q2 2026 from $115M in Q2 2025. The prior year included substantial charges for the closure of the Pernis facility and the Suzhou Huasu Plastics plant.
- Acquisitions: The Company completed the acquisition of the ACI/Perplastic Group (Jan 2026) and a PVC/VCM production site in Wilhelmshaven, Germany (June 2026), contributing to sales volume growth.
- Debt Management: The Company redeemed $496M of 3.60% Senior Notes in May 2026 and entered into a new $1.5B unsecured revolving credit facility in April 2026, extending maturity to 2031.
Outlook, Risks, and Management Commentary
- Geopolitical Impact: Ongoing conflict in the Middle East (commenced Feb 2026) has caused global energy volatility and supply constraints. While Westlake's North American operations benefit from lower natural gas costs, the Company faces inflationary pressures on logistics and feedstocks globally.
- Segment Outlook:
- HIP: Benefiting from housing undersupply and infrastructure spending, though facing lower pipe and fittings prices.
- PEM: Experiencing higher prices for polyethylene and PVC due to global supply disruptions, though facing headwinds in Europe and Asia due to slower growth and trade tariffs.
- Legal Contingencies: Significant pending litigation includes PVC pipe antitrust settlements ($67M accrued and paid in Q2), caustic soda antitrust claims, and environmental matters (Sulphur Mines Dome). The Company estimates reasonably possible environmental losses in the range of $100M to $170M beyond current accruals.
- Dividends: Dividends declared were $0.53 per share for Q2 2026 ($1.06 for the six months).
Investor Verification Checklist
- Antitrust Settlements: Verify the final court approval status of the $67M PVC pipe antitrust settlement and potential exposure from remaining indirect purchaser claims.
- Acquisition Integration: Monitor the integration progress and synergy realization of the ACI/Perplastic and Wilhelmshaven plant acquisitions.
- Feedstock Costs: Track the impact of Middle East conflict on global naphtha-based feedstock costs versus Westlake's natural gas-based advantage.
- Environmental Liabilities: Review updates on the Sulphur Mines Dome containment structure costs and the Calvert City arbitration proceedings.
- Debt Covenants: Confirm continued compliance with the new Credit Agreement's total leverage ratio covenant given the recent debt refinancing.