- Q4 EBITDA Adjustments: Fourth quarter EBITDA of $196,000,000 reflects $511,000,000 in restructuring and cost reset costs.
- 2025 Cost Savings: Delivered $170,000,000 in structural cost reductions, driven by HIP segment resilience amid lower North American housing demand.
- PEM Earnings Recovery: $200,000,000 expected improvement in 2026 from footprint optimization, plant reliability, and structural cost cuts (each contributing $200,000,000).
- HIP 2026 Outlook: Revenue guidance of $4.4B–$4.6B with 19–21% EBITDA margin, reflecting seasonal strength in Q2/Q3 and $200M price increase momentum.
- Liquidity & Tax Efficiency: $2.9B in cash/securities and a 17% effective tax rate in 2026 due to 2025 net operating losses, enabling $100M capex reduction.
Segment Performance
The Performance Materials (PEM) segment's fourth quarter EBITDA decreased by $45 million sequentially, driven by 5% lower average sales price and 2% lower sales volume. However, the company expects to see an improvement in earnings of $200 million in 2026 from footprint optimization, $200 million from better plant reliability, and $200 million from structural cost reductions. The company's proactive steps in the three-pillar initiative, focusing on removing losses, taking cost reduction initiatives, and improving reliability, contributed to the outperformance on an adjusted basis in the fourth quarter.
Outlook and Guidance
For 2026, Westlake expects revenue in its HIP segment to be between $4.4 billion and $4.6 billion with an EBITDA margin of 19% to 21%. The company expects a $100 million year-over-year reduction in capital expenditures and an effective tax rate of approximately 17%. The company's guidance is based on its three-pillar action plan, which includes footprint optimization, cost reduction, and improved reliability. As Mark Steven Bender stated, "We expect to drive real cost savings, improvement in reliability, and become a cash flow-positive generating business."
Valuation Metrics
Westlake Corporation's current valuation metrics indicate a P/E Ratio of -8.9, P/B Ratio of 1.53, and EV/EBITDA of -44.9. The company's dividend yield is 2.03%. Analysts estimate next year's revenue growth at 4.7%. These metrics suggest that the market is pricing in a challenging near-term outlook for the company, but the expected improvements in earnings and cash flow generation could potentially drive a re-rating of the stock.
Operational Highlights
The company has taken proactive steps to strengthen its global manufacturing footprint and is focused on execution, cost discipline, and value-driven growth. Westlake's diversified and complementary portfolio of businesses, vertically integrated business model, and globally advantaged feedstock and energy position in the U.S. are expected to drive long-term value creation. The company's investment grade rated balance sheet with $2.9 billion of cash and securities provides a solid foundation for future growth.