10-Q · May 6, 2026
Westlake Corporation reported a significant decrease in revenue and a larger net loss for Q1 2026 compared to both the prior quarter and the same period last year. The company's revenue came in at $2.65 billion, a 7%…
Earnings analysis · 10-Q
WLK earnings analysis
Filed November 4, 2026 · Our reading of the company's report
The latest report
Westlake’s third-quarter results showed a substantial year-over-year recovery: revenue increased 5% to $2.981 billion, gross margin expanded to 13% from 8%, and the company generated $220 million of free cash flow. The…
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Westlake’s third-quarter results showed a substantial year-over-year recovery: revenue increased 5% to $2.981 billion, gross margin expanded to 13% from 8%, and the company generated $220 million of free cash flow. The improvement was driven primarily by higher PEM pricing and the absence of the prior-year $727 million goodwill impairment, but the company still reported only $0.05 of GAAP EPS and HIP operating income declined 15% amid weaker housing and pipe demand. The outlook remains mixed, with strong liquidity and North American pricing opportunities offset by commodity volatility, higher financing costs, the Cologne shutdown and continued macroeconomic pressure.
From revenue to operating profit
Where each $100 of revenue went in this report.
Cost of sales, operating expenses, and what remained. Figures are rounded to whole dollars.
Where revenue came from
The business segments reported by the company.
Shares of the segments disclosed in this filing, largest first.
Reported figures
- Earnings per share
- $0.05
What stood out
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Revenue grew on higher pricing
Third-quarter revenue increased 5% year over year to $2.981 billion from $2.838 billion. Average selling prices rose 6%, partially offset by a 1% decline in sales volume.
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Gross margin expanded materially
Gross profit increased 62% to $382 million, and gross margin expanded to 13% from 8% in the prior-year quarter. Higher polyethylene, PVC resin, epoxy resin and caustic soda prices, along with lower fuel costs, drove the improvement.
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Profitability recovered year over year
Westlake reported $6 million of net income attributable to the company, or $0.05 per diluted share, versus a $782 million loss, or $(6.06) per share, in the prior-year quarter. Operating income improved to $43 million from a $766 million loss, although EPS was below the $0.52 consensus estimate.
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PEM results improved sharply
PEM sales rose 8% to $1.894 billion, led by a 16% increase in Performance Materials to $1.176 billion. PEM operating loss narrowed to $64 million from $902 million, despite a $51 million Cologne closure charge and higher ethane feedstock costs.
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Cash generation improved
Operating cash flow was $408 million and free cash flow was $220 million in the quarter, compared with $182 million and negative $57 million, respectively, in the prior-year quarter. Capital expenditures were $188 million, or approximately 6.3% of revenue.
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Liquidity and revolver availability remain strong
Liquidity remained substantial, with $1.764 billion of cash and cash equivalents, $207 million of available-for-sale securities and $1.5 billion of borrowing availability under the New Credit Agreement as of September 30, 2026.
What to watch
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Cologne closure carries further charges
Westlake recognized $51 million of Cologne closure costs and expects an additional $150 million of charges, including $84 million of accelerated depreciation and asset write-downs. The 365-million-pound-capacity plant is expected to cease production in the first quarter of 2027, with closure completion targeted by the end of 2027.
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Housing and pipe demand remain pressured
HIP operating income declined 15% to $128 million despite segment revenue of $1.087 billion. Management said excess customer inventory after pipe and fittings customers stocked up contributed to lower third-quarter pipe and fittings volume, which may persist until inventories normalize.
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Commodity and global market volatility
PEM sales volume declined 1% year over year, while Essential Materials sales fell 3% to $718 million due primarily to lower caustic soda sales and the closure of a styrene facility. Management also cited weak European demand, elevated energy costs, Asian import pressure and potential tariff-related trade disruption.
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Higher debt costs constrain earnings
Carrying value of indebtedness was $5.064 billion, and quarterly interest expense rose 27% to $52 million from $41 million. Management stated that a 1.0% increase in refinancing rates would increase annual interest expense by approximately $51 million.
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New environmental enforcement exposure
The company is negotiating with the EPA regarding alleged Clean Air Act violations at several Louisiana facilities from 2020 through 2025; the resolution may involve a civil penalty in excess of $1 million.
Management's outlook
No quantitative revenue or EPS guidance was provided in the 10-Q. Management discussed expectations for housing demand, commodity pricing, facility closures and liquidity, but did not provide numeric company guidance.
Earlier filings 1
This is our reading of a public filing, not the filing itself. Analysis can contain errors; check the source document for full context.