Westlake's Sequential EBITDA Drop Follows Conflict-Price Fade

The Tip Desk · November 4, 2026 · 3 min read

Third-quarter EBITDA excluding Identified Items fell to $408 million from $679 million as Performance and Essential Materials swung to an $8 million operating loss.

Westlake Corporation (WLK), the global manufacturer of building and chemical products, reported third-quarter 2026 net sales of $2.981 billion, down from $3.271 billion in the second quarter, as the sequential lift in Performance and Essential Materials prices that followed the onset of the Middle East conflict faded.

EBITDA excluding Identified Items declined to $408 million from $679 million, a $271 million sequential drop, and the EBITDA margin excluding those items compressed to 14% from 21%. GAAP net income attributable to Westlake was $6 million, or $0.05 a share, after $58 million of Identified Items. Excluding those items, net income was $58 million, or $0.45 a share.

Company average sales price declined 4% sequentially and comparable sales volume declined 7%, excluding the effect of the Wilhelmshaven acquisition. PEM average sales price fell 8% as second-quarter price increases moderated; PEM comparable volume was unchanged excluding plant closures and acquisitions. PEM net sales declined to $1.894 billion from $2.019 billion. Excluding Identified Items, the segment swung to an $8 million operating loss from $185 million of income, a $193 million sequential decline that the company attributed to lower average sales prices, particularly for PVC resin and polyethylene, and higher European energy costs. PEM EBITDA excluding Identified Items fell to $215 million from $416 million, and the PEM EBITDA margin excluding those items compressed to 11% from 21%.

Housing and Infrastructure Products net sales declined to $1.087 billion from $1.252 billion. HIP income from operations fell $84 million to $128 million, which the company said was primarily due to lower sales volume, particularly for pipe and fittings, with some demand shifting from the third quarter into the second quarter as customers sought to secure supply after the conflict began. HIP sales volume declined 17% sequentially, reflecting volume shifts between quarters and an industry-wide trend of slowing residential construction. HIP EBITDA margin excluding Identified Items fell to 18% from 22%.

The company recorded $56 million of PEM charges related to previously announced facility shutdowns, including the Cologne PVC facility, certain North American chlorovinyls facilities and a styrene plant, plus $2 million of other restructuring costs. Taking into consideration structural challenges in Europe, Westlake said it is optimizing its European chlorovinyls footprint by integrating North American chlorovinyls assets with the recently acquired vinyls facility in Wilhelmshaven, Germany, and removing higher-cost capacity with the announced closure of its PVC plant in Cologne.

President and Chief Executive Officer Jean-Marc Gilson said third-quarter results reflected lower North American residential construction activity and customer inventory destocking in HIP, combined with lower selling prices and margins in PEM as initial second-quarter price increases after the conflict moderated. He said earnings in PEM’s European businesses were significantly impacted by higher energy costs, weak demand and increased import pressure from Asia, and that HIP margins were also impacted by higher diesel and freight costs.

Despite those headwinds, Westlake generated $220 million of free cash flow in the quarter, versus $111 million in the second quarter. Gilson said that was in part due to the three-pillar profitability improvement plan, which he said remains on track to deliver $600 million of EBITDA uplift in 2026. Net cash provided by operating activities was $408 million and capital expenditures were $188 million. Cash, cash equivalents and fixed-income investments were $2.0 billion at September 30, 2026, and total debt was $5.1 billion.

Gilson said higher borrowing costs have increased potential homebuyers’ affordability concerns, which the company expects to weigh on HIP’s near-term sales volumes, and that it remains positive on the medium- to long-term outlook for HIP sales and earnings growth supported by investments in growth segments and infrastructure spending. He said PEM selling prices have stabilized with upward momentum entering the fourth quarter of 2026, while an environment of heightened price volatility persists.