Westlake Corporation (WLK) Earnings Call Transcript & Summary

[Presentation] Good morning, everyone. Tough act to follow from that video, but I'll do my best. Welcome to the Westlake Corporation's Inaugural Investor Day, which is being held both here at the New York Stock Exchange and being webcast virtually over the internet. Very excited to see the strong interest in today's event, both from folks here in the room and with the strong interest we have over our virtual webcast system as well. My name is Jeff Holy. I'm Vice President and Treasurer for Westlake. You'll see on Page 2 of the presentation, our speakers for today. These include our President and CEO, Albert Chao; our EVP and COO, Roger Kearns; our EVP and Head of Housing and Infrastructure Products, Bob Buesinger; our Vice President and Head of Sustainability and Corporate Development, Larry Schubert; and Steve Bender, our EVP and CFO. We're also joined today by many members of our senior leadership team here in the room. For those in the room, you can also see some product displays behind those doors that highlight some of the exciting materials and products we'll be talking about in today's presentation. These product displays highlight the specialty and downstream nature of our materials, our leading building product offerings across many high-value product categories and our increasing portfolio of sustainably oriented product offerings. Before we review today's agenda and go into our presentation, I would like to briefly cover several of the recent changes at Westlake and how those will carry through to what you'll hear from us today. In February, we announced our name change to Westlake Corporation to better reflect the breadth of products we provide and the industries we serve, including housing and construction, automotive and consumer lifestyle, packaging and healthcare. In conjunction with this name change, we also resegmented our business for financial reporting purposes. Our new Housing and Infrastructure business, or HIP, reflects our leading portfolio of building products, including our 2021 acquisitions of Boral North America, LASCO Fittings and Dimex-recycled consumer products. Our Performance and Essential Materials business, or PEM, is a leading producer of products that improve everyday life and reflects our leading materials in chlorovinyls, including specialty PVC, polyethylene and our recently acquired Epoxies business. The takeaway from these changes reflect an evolution Westlake has been progressing on for many years, which was amplified by the significant acquisitions over the past year, that is we have been increasing our level of integration, moving further downstream and closer to the end customer and in more value-added and specialized products and in market with attractive growth opportunities and with more sustainably oriented product offerings. That includes our leading building products business, where we compete in size, breadth and brand recognition with the leading publicly traded building product companies in the marketplace. We believe these characteristics make Westlake a very compelling investment opportunity today when considering the earnings power and bottom line growth opportunity these attributes provide, our proven track record of operations, capital allocation and execution and the valuation of the earnings streams that these more downstream, specialty oriented and building product position businesses warrant in the marketplace. Returning quickly to Page 3, you'll see today's agenda to cover these topics. Today's presentation will begin with Albert Chao, who will provide a short overview of Westlake and summarize our focused approach to delivering on value and growth. Roger will then discuss the attractive attributes of our Performance and Essential Materials business, or PEM, with its focus on specialty and downstream materials. Bob will then cover our leading presence, brand recognition and attractive growth outlook for building products in our newly formed Housing and Infrastructure business, or HIP. We'll then offer an opportunity to take questions both in the room and through our webcast system over the internet before providing a short break. We'll then have -- we'll then return to have Larry cover our significant progress in sustainability and ESG. Steve will then cover our impressive track record of financial returns and continuing capital discipline before turning the presentation back over to Albert to provide some concluding remarks. We'll then provide another opportunity for Q&A before breaking for lunch and showcasing the products that are on display here today. I would remind folks that today, management will be discussing certain topics that contain forward-looking information that is based on management's beliefs and assumptions made by and information currently available to management. These forward-looking statements suggest predictions or expectations and thus are subject to risks or uncertainties. These risks and uncertainties are discussed in Westlake's Form 10-K filed on December 31, 2021, as well as other SEC filings. Today's webcast can be accessed at the Investor Relations section of our website, and an archive will be available starting 48 hours after today's presentation. We'll also post the slides from today's presentation after the conclusion of today. I would remind folks that information speaks only as of today, April 7, 2022, unless any information may not be timely at the time of any replay or later archive. Let me again thank everyone for the interest in today's event. And now, I'd like to turn the presentation over to our President and CEO, Albert Chao. Albert?

Thank you, Jeff. Good morning, ladies and gentlemen. Thank you for coming to Westlake's first Investor Day conference. I'm Albert Chao, and along with my brother, James, Chairman of the company and all my colleagues at Westlake, we'd like to extend you a warm welcome. As a result of the contributions of many of our talented colleagues through our 35 years of history, we are very proud to present to you Westlake. Westlake started 35 years ago in 1986 with 1 plant in Lake Charles, Louisiana, and with less than 100 employees. And today, we are over 100 locations and with 16,000 employees around the world. The company was built quoting Winston Churchill with a lot of blood, toil, sweat and tears. But I want to add also that it was a lot of fun as well. Our goal today is, hopefully, by the end of our presentations, you will have a much better understanding of Westlake, who we are, where we have been, where we are going and how we will continue to create long-term value for shareholders. So I want to start by defining who we are at Westlake and what our mission is. We strive to serve our customers by safely and reliably providing quality and sustainable materials, products and services that enhance people's lives every day. The strive for quality is exemplified by the W, Westlake logo on Westlake. You can see it's 2 colored checkmarks. And one check mark is for the quality of our products, and the other check mark is the quality of our services. On our values, we focus on the health and safety of our employees and the stewardship of the environment and provide also an environment that, for our people, allows them to do their best and position themselves to achieve their personal goals. We hear often that people are the most valuable assets a company can have, and for us, it's absolutely true. We try to hire and find the best talent people we can find, sometimes through acquisitions, sometimes through external hires and then provide them with resources and incentives and for them to achieve their goals, as well as company's goals. We have been incentivizing our management based on the old term, still in stewards, economic value added, or the EVA, model over 30 years ago. And the goal is to earn above our cost of capital on a long-term basis, and it has been working very well. We also focus on continuous improvement throughout the organization and have been implementing Six Sigma and Lean practices from the very beginning of the company on a global basis, and we have been receiving material benefits every year. We are -- we understand we compete in a very competitive market, but we also pay attention to the company in a manner that puts equal emphasis on our results and improving our communities and everyday lives of our customers and employees. Going on to Slide 6. Over this morning, you will hear why Westlake is a compelling investment opportunity and what our team is most excited about. First, we have a strong and experienced leadership team, with a track record of creating long-term value. In our legacy Performance and Essential Materials business, what we call PEM, P-E-M, we are accelerating both growth and profitability by leveraging our low-cost position and market-leading positions across specialized and strategic product offerings. Some of those product examples, you can see outside in our display. On the Housing and Infra Product side, or we call the HIP, H-I-P, business, we are well positioned to benefit from strong residential housing, repair and remodeling growth, with our market-leading positions and brand name products. You'll hear a lot more from my colleagues later on. Underneath all of that is a portfolio of opportunities in both segments as we move forward, implementing operational excellence across recent acquisitions and invest in digitization and automation and coming up with environmentally sustainable products and in manufacturing processes. And lastly, our disciplined investment culture and strong balance sheet allows us to not only weather any potential storm but also act on strategic growth opportunities at any point in the cycle. Going to Slide 7. This chart illustrates the key events in our business since our inception, 1986, that have allowed us to grow our top line, both through acquisitions and through internal expansions. And that means by building state-of-the-art new plants or after acquisition to expand our businesses. So we would acquire when we have the right opportunity at the right price. And sometimes, we can't acquire assets or businesses, then we build new plants or new businesses. And we have been lucky enough or hard-working enough that this growth over the last 35 years is at a 16% average annual compound rate of growth for the last 35 years. To where we are today. You can see on this chart, the green events are the acquisitions, and the blue events are the organic expansions. At Westlake, we are not just looking for ways to grow the company but to strategically grow the company in a thoughtful way, methodical way, step by step through a prudent use of our strong balance sheet. And as you can see from the left, in our early years, we were strategically integrating our businesses, both backwards and forwards. As we said earlier, we started with 1 polyethylene plant in 1986. Then we built our first ethylene plant in 1991 to provide low-cost feedstock to our polyethylene plant. We acquired our first VCM plant, vinyl chloride monomer plant, in 1990, then acquired PVC plants in 1991 to consume the monomer, the VCM, to produce PVC. And then we acquired our first PVC pipe plant or plants, actually, 3 plants, in 1993 to consume the PVC that we produce. So after that, we kept on strengthening our positions with more ethylene, VCM and PVC plants and capacities. After our IPO in 2004, we started to focus more on specialty materials and products. In 2006, we acquired Eastman's chemical specialty polyethylene business. And in 2013, we acquired CertainTeed, which was part of Saint-Gobain, specialty PVC pipe business, and some of the examples of our well and irrigation pipe, patent pipes are outside in this room. In 2014, we went to Europe and acquired Vinnolit, which was spun off from Wacker and Hoechst, 2 large German companies. And that was the global, the #1 specialty PVC resin producer. Some examples of our recent transformative transactions, including acquiring Axiall in 2016, putting Westlake as #2 globally in PVC and chlor-alkali and #1 in chlorovinyl business globally, combined the PVC and the chlor-alkali capacities. In addition, the Axiall acquisition got us into building products in a substantial way. Our acquisition of NAKAN, which was based in France, in 2019, combined with Axiall's PVC wire and cable business, which is all in the U.S., also places as the world's largest PVC merchant compounder serving the growing PVC wire and cable business, which is targeted for housing, electrification, EVs, electrical vehicles and also serving the healthcare and automotive markets. At the same year, our acquisition of the DaVinci roofing business placed us as the largest composite roofing company in the U.S. We also increased ownership in our ethylene cracker joint venture to further integration and lowering our feedstock costs. In 2021, we did 4 more transformative acquisitions with Boral North America building products, Dimex, which is a recycled plastic consumer products producer, LASCO, a large PVC pipe fittings producer and lastly, Axiall Epoxy. Going to page -- Slide 8. Building on our history of growth, we see these acquisitions as having exciting underlying market dynamics, as well as having powerful opportunities to further expand our capabilities. It's like a stepping stone to the next level. The LASCO fittings business is a huge addition to our existing pipe and fittings business and allows us to enter new markets in plumbing, pool, spa, as well as irrigation markets, making us the largest PVC pipe fitting producer in North America. As mentioned earlier, Dimex is a pioneer manufacturer of consumer products built from collecting post-industrial recycled PVC and polyethylene. The offerings complement our HIP product mix but also provide us with a new source of catalytic ideas to advance our contributions in the circular economy to apply across all our businesses. The Boral addition dramatically upgraded our scale, our branded set of products and our geographical reach to serve our customers in the housing construction product business. The Epoxy business is benefiting from some of the major demand trends globally. The capabilities we have added here allows us to serve as the largest epoxy supplier to the sustainability-driven growth markets in wind turbine blades, for renewables electrification, construction, and as well for construction lightweighting in the automotive and aerospace businesses. In addition to these exciting new capabilities, as these acquisitions are integrated over 2022 and beyond, they will be compelling from an earnings growth profile perspective. Finally, with the significant expansion of our HIP business, it's noteworthy that HIP business is far less capital-intensive and has a low cyclical correlation with our traditional PEM business, thus dampening overall earnings volatility of our portfolio. Going to Slide 9. On this slide, we highlight the significant improvement in our results over the last 10 years, which is pretty impressive. Considering we have grown our EBITDA and free cash flow per share at 19% and 26% CAGR, respectively, for the last 10 years. And on a 14% revenue growth CAGR rate, it is even more impressive when you look at our return metrics over the last 10 years, whether it is both of our chemicals and building product peers. As you can see, we have significantly outperformed in both return on assets, ROA, and return on capital employed, ROCE, while also significantly outperformed in EBITDA margin. These strong results are driven by several factors, including our focused growth strategy, asset quality, operating rates and fixed stock advantages we have benefited over the years, our integrated portfolio and leading product mix. The graph on this slide, we're going to Slide 10, shows the strong results I have just covered, has also been reflected in our share price. As we have significantly outperformed the S&P 500 and peers since going public in 2004. This is also due to the positioning of Westlake for continued profitable growth, with leading market positions in value-added products, supported by a significant R&D and innovation pipeline. Looking forward, we have a favorable market outlook, coupled with a positive supply and demand dynamics, and a strong balance sheet to fund new opportunities that complement Westlake's strengths. Going to Slide 11. Our long-term performance is also rooted in our commitment to operational excellence. We believe that our best days and opportunities for growth still lie ahead. Key priorities for our operational excellence and success is to sustain its performance are one, continue to allocate capital with a disciplined economic value-added approach; two, build on strong underlying demand in our segments, with additional organic and inorganic extensions of our business into profitable new sectors; three, continuously reinvesting in productivity enhancements driven by innovative applications of technologies such as robotics and artificial intelligence; four, ensure that we continue to attract, retain, inspire and develop employees that drive our success; and five, make disciplined progress of impactful sustainability solutions for our customers, as well as in minimizing any negative externalities in our own footprint such as carbon emissions. Going to Slide 12. Our overall operating philosophy for Westlake is rooted in the long-term perspective to deliver sustained excellence in our results. Our commitment to overall sustainability springs from that approach. Demonstrating care for our stakeholders is crucial to our long-term success, and we have been committed to those values since the founding of our business. As more formal frameworks for ESG have risen, we've embraced and accelerated our efforts there, both for customer impact as well as in our internal operations. We have expanded our sustainability capabilities through organic innovations with products such as lower carbon caustic soda and PVC, as well as through acquisitions such as Dimex and our Epoxy business. While we have grown our business mix into these higher value-added sustainability solutions, we have also consistently driven improved environmental efficiencies in our own operations. We have just established new aggressive forward goals to continue reductions in our CO2 emissions through 2030. Going to Slide 13. On this slide, we show that what the portfolio looks like today, with sales of $14 billion on a pro forma 2021 basis, to account for the full run rate of recent acquisitions. Starting with the PEM segment, with sales in excess of $10 billion. Roughly 70% of that comes from the performance side of the PEM business, which consists of PVC, polyethylene and epoxy performance polymers. And the remaining 30% is essential products such as chlor-alkali and olefins. Sales are supported by our leading positions in chlorovinyls, polyethylene and epoxy that you can see in the middle of the page. The remaining roughly 30% of Westlake sales comes from the HIP side segment, with sales over $4 billion. Approximately 80% of the HIP segment sales come from the housing side, which include the Royal Building Products Group, residential PVC pipe and fittings, residential-related global PVC compounds and Dimex. The remaining 20% of the sales of HIP are related to the infrastructure side and include large diameter PVC pipe fittings and global PVC compound sales, which relates to the infrastructure markets such as electrification, infrastructure, automotive and medical. Like PEM, you can see we enjoy many leading HIP positions across many product categories as shown in the middle of the page, #1 or 2 or 3 positions in the industry. It's also important to note that nearly 90% of the production capabilities of Westlake, total Westlake, are North American based. Going to Slide 14. Throughout this event, you will hear from me and other Westlake team members on how we are moving closer to our customers, which I'll cover at a high level on this slide. In PEM, we see growth drivers in Performance Materials coming from wind turbine, energy and EV lightweighting trends, as well as renewable and recycled waste reductions, favorable supply and demand dynamics for PVC in the housing and construction markets and a growing demand for specialty vinyls business. On the essential materials side of PEM, we also have a favorable supply and demand dynamics and a growing demand for caustic and chlorovinyl products. Some of the applications demonstrate our closer touch to the customers, including epoxy for wind turbine blades, specialty PVC for consumer products, chlorine for water treatment and caustic soda supporting industrial end markets. Moving to HIP. On the housing side, we see an underbuilt U.S. housing footprint and favorable demographics, supporting continued growth combined with historically strong repair and revolving spend. In infrastructure, we see support from the U.S. infrastructure bill and electrification trends. Some examples of the applications close to the end user market, including roofing, trim, molding, siding, window, decorative stone for housing and products to support distribution of drinking water and sewer water treatment as well as medical and automotive applications in infrastructure. Going to Slide 15. The initiatives I have described on the previous pages all fit into a disciplined and proven strategy that has as much positive momentum as I can remember in my career. Our vertically integrated chain continues to build from our well-established low-cost material foundation in key feedstocks to manufacture an array of differentiated materials and products to serve customers' needs in key sustainable markets. That growing portfolio of products is increasingly differentiated and branded. We believe that we still have significant opportunity to build competitive advantage and customer preference around our branded products, particularly in the HIP businesses. What will drive this value-generating process with reinvestments of our profits and strong balance sheet into operational improvement, capability enhancement and additional capacity to fulfill our customers' needs, all executed with constant focus on our economic value-added approach. That self-reinforcing and sustainable cycle of value creation has generated premium returns on capital employed for decades. And I said earlier, I see more new opportunities to continue that success going forward. To Page 16. As we have renamed our business and resegmented our reporting to reflect that we have transformed our business beyond the traditional chemical business, I want to highlight the benefits of the combined PEM and HIP portfolios. For one, our vertically integrated chain allows us to apply our cost advantage materials to innovative, branded and value-added products such as siding, trim and molding, pipe and fittings and compounds for wire cable, housing, automotive and medical and to create greater reliability on production for both. Second, the uncolored nature of the chemical pricing cycles and housing, building and remodeling cycles creates greater overall stability in our earnings and cash flow over time. Third, the highly profitable cash flow foundation of our PEM business creates strategic flexibility for reinvestments in our HIP business, where many smaller and private equity-owned competitors in the fragmented marketplace like the same access to capital. Fourth, HIP office, Westlake, and additional new universe to which to apply our M&A skills and one of which the highly fragmented competitive universe increases our opportunity set. Beginning on the Slide 18, we are going to take a closer look into the segments, starting with PEM. Later on, Roger and Bob will provide more detail in their segment presentations. PEM is a leading global producer of a performance-oriented and essential materials that benefit from a globally competitive low-cost position and specialized product orientation. The PEM segment includes Westlake North American vinyls, Westlake North American chlor-alkali and derivatives, Westlake European and Asian Chlorovinyls, Westlake Olefins, Westlake Polyethylene and Westlake Epoxy. On a pro forma 2021 basis, our sales in PEM are excess of $10 billion, representing roughly 70% of total Westlake sales and supported by roughly 7,000 employees across 30 production locations. As I mentioned earlier, we have strong market position across many categories and are highlighted in the middle of the page. Going to Slide 19. One of the key strengths of the PEM segment is our strategically placed production footprint, with approximately 84% being located in North America, which is the lowest cost location to produce these materials. This is due to the access to low-cost inputs such as natural gas for energy, gas-based power, cells from [ cell domes ] nearby and ethane from natural gas liquids production in the U.S. Further advantages are driven by the quality of our assets, product integration and focus on continuously improving our production operations. The remaining 60% or so of the capacity lies in international locations and specialty products, such as specialty PVC and Epoxy. On Slide 20, the growth potential and strong production footprint of the PEM segment will be further enhanced with margin improvement efforts. These are centered on our ongoing investments in operational excellence such as digital and automation investments and Westlake's continuous improvement program to enhance efficiencies. From a product mix standpoint, we see a tailwind as we continue to grow specialty value-added materials that, of course, come with a higher margin. And lastly, integration benefits across our manufacturing footprint have historically driven best-in-class margins and returns. Going to Slide 22. Moving on to the HIP segment and take a closer look, roughly 80% of sales come from the housing-related market, which is evenly split between new construction and repair and remodeling spend. The remaining 20% is related to infrastructure activities. And I also want to highlight how close we are to the customer, with branded products and going to market with roughly 80% of sales going through one-step distribution. As I mentioned earlier, we have strong market positions across multiple product sales categories that are highlighted in the middle of the page. Going to Slide 23. Moving to this slide, you can see that secular trends continue to drive U.S. housing demand growth, which will benefit Westlake's building products and our PVC business. Favorable demographics with increasing number of U.S. population to be in peak household formation years are intersecting with a dearth of housing supply as shown in the chart on the lower right. Under building of homes since the 2007, 2009 financial recession creates significant cumulative deficit in available homes today. Impact from COVID-19 pandemic is also driving increasing preferences for single-family homes away from multifamily housing. Single-family housing is typically larger in size than multifamily units, thus requiring more building products. The availability of remote work has also led to an increase in demand for houses, further from city centers, and people are customizing those houses to meet their needs. The graph on the top right shows that in 2021, was the year we finally had housing starts equal to the historical 50-year average in the U.S., highlighting the underbilled in housing for 14 years and, in the meantime, with continued population growth. The bottom left chart shows the growing trend in repair and remodeling expenditures, which is a predictable source of demand, which, [ approximately ] is 50% of our products are leveraged to. On next slide, 24. Beyond this housing and remodeling trend, we see other funnels of growth. The growth comes especially from converting wood to composite products, particularly in trim and moldings, where we have a market-leading position, and composite only makes about 20% of the market currently. Simply leveraging our product strengths and name brands across a national footprint, which I will touch on more in the next slide, provides additional growth and higher product adoption rates. And lastly, we expect growth to come from the U.S. infrastructure bill as it relates to increased spend on water infrastructure and electrification trends that our products play well. On Slide 25, in 2021, we acquired Boral North America, which was transformational in our housing segment, as we now have a full suite offering with leading market positions. In the middle of the page, we highlighted some of our key name brands under umbrella that most of you may have already heard of or have in your house today. And lastly, we show how significantly Boral expanded our national footprint, given we only had locations in the light blue states prior to the Boral acquisition. And today, we have 33 locations across the U.S. Actually, it's 44 locations across North America at Westlake Royal building products, allowing us to provide products essentially anywhere in the U.S. and Canada. Going to Slide 26. This slide shows all the levers to further improve HIPS margins, starting with an increase of higher-margin value-added products. On the production and operations side, we'll pick up benefits from a new Windows manufacturing facility to address growing demand, coupled with us leveraging the production knowledge from our legacy business and investing in automation and digitization across the segments. And lastly, we will see the benefits as we integrate Boral and improve our cross-selling capabilities under an umbrella of leading brands and market positions, as well as with the continued product development with more sustainable and value-added products to our customers. On Slide 28. We are always in the market for opportunities to deploy capital in situations where we can invest at attractive costs. In addition to bringing new products or technology advances into the Westlake product portfolio, our capabilities in executing these type of transactions have served us well in consistently strengthening our market presence and the resilience of our business. We have excellent market dynamics in the underlying supply and demand in both of our business segments. Our strong balance sheet also allows us to proactively reinforce those opportunities. Finally, let me emphasize that our products support today's core consumer needs, including society's growing sustainability aspirations. As a significant enabler of our success, on Slide 29, has been our history of maintaining a strong and flexible balance sheet. Our balance sheet today provides us with a platform to pursue any avenue for growth and innovation that meets our strict criteria. Maintaining a strong balance sheet, capital base has always allowed Westlake to seize investment opportunities organically or through M&A and to act quickly when competitors may be constrained due to capital constraints. On Slide 30, in order to consistently generate premium returns and value creation that have defined Westlake's history, we have to continually plant seeds for the next chapter in our story. As I have said earlier, I'm very excited today about the range of opportunities ahead of us. In PEM, our low-cost position from the foundational base in chlor-alkali serves industrial and manufacturing customers globally. We continue to increase our sales mix exposure to specialty, premium price, performance and essential materials. We also continue to add new capabilities with additional, such as epoxy that expands our exposure to attractive higher growth and higher value-added markets. With the recent increase -- increased scale of our HIP business, Westlake's added a significant new platform for growth through exposure to favorable underlying market dynamics, operational improvement opportunities and multiple vectors for new product development enhancing brand values and inorganic growth opportunities. In short, we have multiple avenues supply our proven operational engine to continue to generate premium returns and value creation. As we look forward on Slide 31, we believe that our strong foundation and recently-added platforms for growth will pay dividends for many years to come. You will hear in more detail from my colleagues about our collective excitement and a range of opportunities that we're prepared to take advantage of. We see opportunities across our segments to grow organically and inorganically, while continually reinvesting and planting more seats for our sustained long-term success. Going to Slide 32. Wrapping up my section, I want to leave you with a few important high-level thoughts. One, Westlake is a competitively advantaged low-cost provider. Our Performance and Essential Materials, PEM, that is, that enhance people's lives every day. Two, our performance in Essential Materials business is well positioned for the future, with growing positions in specialty markets and strategically chosen market sectors, with favorable supply-demand dynamics. Three, we have built a housing and infrastructure products, the HIP business, with leading positions in key product areas and with strong underlying market fundamentals, as well as having multiple areas for self-improvement and expansions. Four, there are significant top line and margin improvement opportunities from the ongoing integration and operational uplift of our $3.8 billion in recent acquisitions. Five, the experiences and skills that have driven our exceptional track record and the flexibility offered by our strong balance sheet, enable our ability to capture all of these opportunities and beyond. So we believe that the future is extremely bright for Westlake, and thank you for spending your time with us today. I hope you will find, by the end of today's presentations, Westlake's investment opportunity is as compelling as we do. Thank you very much. And now, I'd like to turn the presentation over to Roger. Roger Kearns is our COO, Westlake and EVP of the PEM segment.

Thank you, Albert. Good morning, everyone. As Albert mentioned, my name is Roger Kearns, so currently COO of Westlake, put my name up there. Just as a quick introduction, so I've got around 36 years in the chemical industry. That started in polyolefins through PVC, chlor-alkali, high-performance polymers, even in carbon fiber composites. And we've been fortunate enough to really live all over the world. So about half of my career has been outside the U.S. and half in, but that background actually, I think, has prepared me relatively well for the PEM segment that we have today, which goes from polyolefins, coil vinyls and into epoxy. I think one of the things that you're going to hear today, and Albert gave a great overview, as we go into a bit more detail is how excited we are about the foundation that we've built and the way in which we can lever that into the downstream businesses. So over the next 25 minutes or so, I'm going to try to dive a little bit deeper into the messages that Albert brought forth. Over the last 8 years, we've really been working to move our portfolio of our specialties, and you'll see that. The specialty focus has allowed us to not only move the PEM segment a bit to a higher price, higher margin place, but to prepare the way for the HIP business downstream. We are achieving best-in-class cost positions, heavily focused with our North American footprint, which gives us really an advantage on our raw material costs, on our energy costs and in a highly vertically integrated strategy, which you will see go from PEM out through the HIP businesses. Organically, we're continuing to grow through expansions and debottlenecks in our existing sites, and we'll continue to do that, as well as look for external acquisition opportunities. And on the M&A side, as you know, we just closed the Epoxy business 2 months ago. And so we're bringing that into the Westlake business now. And it's another platform for growth, another platform to move and to apply, what I would call, the Westlake way or our model of acquiring, integrating, investing in reliability. We invest in competitiveness and then we deliver value and then we repeat. And finally, I would say we've got really an intense focus on operational excellence, which allows us to drive margins and really applying on top of that today, our digital investments to allow us to really create an uplift in the value of our basic raw materials. Now, as Albert mentioned, the PEM segment today, roughly $10 billion in sales. We talked a little bit 70% of that coming through our Performance business. Our Performance business, in our words, is really our polymer business. So it's polyethylene, PVC and the epoxies. And then 30% on the essential side, which is really our chlorine and our caustic and those chlorine derivatives. This really gives us a very strong and balanced footprint in the PEM business. As we really look at this in a little more detail, Albert mentioned that we've got market-leading positions. And you'll see that in that column on the right, really, is the globally largest chlorovinyl player in the world. We really take that and leverage that through position to bob in the downstream businesses. Those top 1 or 2 positions allow us to be really an impact player in the markets where we're playing as well. On the lower right, Albert mentioned this on his graph, 84% of our manufacturing capacity is here in North America. And this is a tremendous advantage for us today, from both the raw material side and the energy side on these materials. And as we see today, as oil prices rise globally, this advantage solidifies and expands. If we look over the last 35 years, this is a picture of the growth and capacity of the PEM business inside Westlake. September '86, Albert mentioned, we started with a very small plant in Lake Charles, Louisiana, up through 2022 with the acquisition of the Epoxy business. We have an overall compounded growth rate of 15% a year on a 35-year basis. You'll see on the graph a number of jumps in capacity. Those come from our acquisitions. In 2014, we acquired Vinnolit, the specialty PVC player in Europe; 2016, acquiring Axiall. 2019, we increased our ownership in our ethylene joint venture and in 2022, the acquisition of Epoxy. But you'll also see between those jumps, kind of a steady incremental increase in our capacity, and that comes from our ongoing debottlenecks and marginal capacity expansions that we can make in our sites. Each time we make one of these acquisitions, it gives us the opportunity to apply our operating model to the new sites to achieve additional low-cost capacity increases in each of these platforms. So overall, we've been able to build a powerful foundation for our business on the material side, which sets up our business on the downstream product side. So now, we'll take a look kind of at the 4 product areas inside of PEM in a little more detail. We start off with PVC. You know very well, and on our demonstration out back, that PVC goes into a large number of building and construction products. You'll see them in our infrastructure products in the water treatment, both on freshwater and wastewater. And so having this #1 position in this very strong North American footprint gives us a very strong platform for our PVC business and our specialty PVC business. In the polyethylene, we make both low density and linear low density. Our focus is really on the specialties inside of our polyethylene business. We see that playing out in encapsulant films for solar panels, a significant number of automotive applications and a large focus on medical and food safety and food preservation. Several global trends are really helping to drive the growth in this business. That's certainly electrification. EVs, lightweighting, we continue to kind of see our polyethylene focused on medical and food as well as the energy transition that we have. Jump on Epoxies. Epoxies is our newest business, has come in to give us a really strong platform focused on sustainability and sustainability-focused applications. Our Epoxy business has a #1 position in wind turbine blades. And as we continue to move to more offshore wind turbine systems, those blades become longer and become even more important for the epoxy systems and the fibers that make that work. We have a very strong application in construction, metal coating, really anticorrosion products in that. And then certainly, automotive and aerospace, key applications for our Epoxy business. So the global trends driving that, electrification, the energy transition. Our growth in EVs is quite compelling for both our Epoxy business and for the chlor-alkali business, which is where I'll go next. Our chlor-alkali business has really essentials, chlorine and caustic. Caustic is used in the manufacturing of literally everything. It's really a ubiquitous chemical that we use in almost everything we make. Water treatment, disinfectants, paper tissues, fiber, aluminum, cardboard packaging, all of these benefit and need our chlor-alkali products. As we see, one of the growing trends for our business here is the electrification of vehicles and EVs. IHS Markit, the industry consultants based Chemical Group, did a study for us. And they've come across with basically to create an electrical vehicle you use 4x as much caustic as you do on an internal combustion engine. And as we continue to see this change from internal combustion to electronic vehicles, that is a significant growth driver for our chlor-alkali business. So we put all this together, it's really the combination of our products, our asset footprint and this focus on specialties is leading us to quite strong EBITDA margins and return on capital. You see on the right side of the film, our '21 performance, very strong EBITDA margin, very strong return on capital. So let's take a little bit of detail into this idea of one of our core focuses on integration. And so we really work hard here on high product integration with this globally advantaged low-cost footprint. For us in our business here, our raw materials are ethane and salt. And we pass that all the way through until you go out and you see in the outside display area products that you can buy in a big box retailer and put in your house. This creates a strong and very complementary value chain, as Albert mentioned, dampens a bit the volatility through our business. Ethylene and chlorine are the 2 key building blocks for what we do. We've got fully integrated today into ethylene. We make tremendous amounts of chlorine and caustic, and then we roll those through to our downstream businesses. The ethylene feeds the polyethylene business, our styrene business, our PVC business. And chlorine is a molecule that really makes our PVC business, as well as our HIP business, pass that completely through there. But the new baby that we have with the Epoxy business, it's very important and it's also a chlorine derivative. And over time, we've been engaged in a very disciplined strategy to grow and to further integrate this chain. Our asset base, we debottleneck each step of the chain as we go and allows us to really create this incremental continuous capacity increase that you've seen and you saw on the earlier slide. Now as Albert showed this in this section, this North American footprint is extremely important for us. The fact that we have 84% of our manufacturing footprint in North America allows us to have that extremely low-cost position globally. And we do have another plant in Europe. Our European sites are all focused on specialties, whether that's our specialty PVC or our specialty epoxies, where we have a price premium, and we'll go into more details on that in a few minutes. So with us being integrated from feedstocks through the final products, we can capture the margin that comes through each step of that chain. And so as we continue to grow, we continue to leverage the low-cost footprint in North America to move us into the specialty footprint. So just to highlight a little bit what are these enhancers we would call or accelerators of our growth on the revenue side. First off, we believe we're extremely well positioned in chlorovinyl chain from a very favorable supply-demand balance, and we'll go into that in more details in a second. Number two, the epoxies gives us a completely new platform to apply our operating model and new areas for growth. Number three, as we watch the energy transition and this need for food safety, we continue to see ways to leverage our polyethylene business and our specialty applications. And lastly, as we shift downstream closer to the customer, we're able to continue to understand both those drivers of growth and, in fact, the needs of our customers in those areas. So if we look at the cholorvinyl chain, today, we begin with ethylene and chlorine. We go through each step to build that, which is to make EDC, VCM, vinyl chloride monomer, PVC and then down into our HIP PVC products. This allows us to capture through that chain, and we have assets in every block on this slide. As we put those blocks together, not only do we have assets in each block of the slide, but we have those in multiple sites. And so it allows us to optimize not only units within a site but optimize a site, to optimize the network of sites, which continually gives us the opportunity to creep and grow our capacity. So when we work all this together, we take our upstream integration in chlor-alkali, low-cost natural gas, low-cost ethane to build that. We pass it all the way down to the end of the line in this concept of integration. And North American footprint gives us a very, very strong picture. I mentioned a little bit a while ago, we think we're in a very good position on the chlor-alkali to benefit from a strong supply-demand balance. When we look at this on the left side, we show a little bit the Westlake position versus a number of our competitors. We are the #2 player globally in PVC, the #2 player globally in chlor-alkali. As we create this chlorovinyl chain, we take that leadership spot. This allows us, really, we believe, to be strongly positioned among our global competition through the chain integration. We have a greater ability to serve customers globally. We do have global customers, we can serve them in multiple continents. And we benefit really from this broad geographical footprint of both taking our specialties that we make in Europe for PVC and leveraging our sales forces around the world to push those products out or vice versa on our epoxies that we would make here in the U.S., and we can do that similarly. So a very important topic, though, on the right-hand side is a little bit of a discussion on the supply-demand balance in chlorovinyls. IHS Markit put this chart together where they're comparing the rate of global GDP growth to the rate of PVC capacity growth on the top graph. Anywhere you see the light blue bars, that means the GDP is growing faster than the capacity additions in PVC, the bottom chart, same chart, except for caustic soda. And so as we know that these products grow historically with GDP, what we see is over the last 5, 6 years, really a deficit of capacity increases. And the demand growth has caught up and looks going forward, we continue to see what we believe is a relatively positive demand-supply balance for this market. One of the reasons why is this that we're not all rushing out to increase capacity. On chlor-alkali, you do have coproducts, chlorine and caustic. You have to make sure that you have an outlet for both, the chlorine and the caustic. And if you decided today to build an integrated complex of chlor-alkali PVC, you would really need to build an ethylene unit, an EDC, a VCM, a PVC. You'd have to have an outlet for your caustic, and you would probably need a cogeneration unit to drive that power. You put all that together, and IHS has suggested that's probably a $5 billion investment on a world-class site with 5 years to execute. And so this is a very significant business that takes a significant amount of CapEx. And so what we see is we think a very favorable supply-demand balance going forward. If we talk about epoxies just for a second. As I mentioned, we completed the acquisition 2 months ago. We're very happy with the new business, and as we bring it in and start to integrate it in the Westlake system, bringing the teams in, we're finding a very capable workforce and a very positive product mix. You heard on the video earlier, the integration with our customers to design brand-new products. And you'll see in the application area out there, a very large part on the new F-150 Ford truck. That is one of the demonstrations of how these products add value. Whereas epoxies is really going to expand our integrated business, very attractive growth aspects, very sustainable focused applications, and we continue to see growth, once again, in EVs, in aerospace, and quite a few applications in coatings of protecting metals. This significantly expands our scale. We have 8 new sites, manufacturing sites around the world. We have 5 new R&D centers. The business brings over 330 patents with it, demonstrating the technology focus that comes with this business. So today, we have a very strong portfolio of specialized epoxies. You'll notice in the middle graph, more than half of our sales are on the specialty epoxy business, about half is the building blocks to make those epoxies. And then on the right, we have these application settings. And very strong applications for electrical applications, semicon chip manufacturing, as an example, adhesives, composites and construction coatings. Think one of the piece you'll see in the middle, lower right is we have a very balanced geographical sales footprint. About 40% of our sales in North America, 35% in Europe and 25% in Asia. This gives us a very strong, balanced global footprint, with manufacturing locations on those continents as well. If we talk about polyethylene for a minute, there's 3 general categories of polyethylene, high density, low density and linear low density. At Westlake, we only make low density and linear low density, and we're able to take those products, and this is where we really apply the specialty mentality and the specialty focus. Today, we have over 40% of our capacity is simply focused on specialties. Those are allowing us to be made in an autoclave reactor, which is a technology, which is much more focused for specialty applications. And you'll see on the right that 80% of our capacity is in autoclaves. This means that our specialty focus, we have the technical capabilities but also the assets to support that and support that growth. Second piece of what this does is it protects us a little bit from much of the new capacity coming into the market in polyolefins. Most new capacities are going to come on to be very large, tubular, high-volume, single product type lines, and our focus on specialties protects us when those new capacities come online. And I think you'll see, we have a very large percentage of our business and our assets are in low-density polyethylene. And the autoclave is a bit our protection and our focus to specialize. [ Lupe ] mentioned before that we're continuing to move downstream closer to the customer, higher innovation and creating a bit higher barrier to entry on the products that we make in the PEM section. Our applications, specialty PE, very heavy on medical, food packaging, food safety and security. Our specialty PVC on medical and in premium synthetic leathers, I would say, on your interior of your cars, as an example. And then on our epoxies, very, very heavy focus on the wind energy transition, with the wind energy being #1 market for us, and we continue to grow that. As we said today, we have 9 R&D centers around the world. The Epoxy business added a few on that, which really helps us lever that, and it is in Europe. It's in North America, and it's in Asia, across 3 continents. And so the focus on innovation, taking our core products that are very cost effective and adding this specialty mix is allowing us to grow our margins. We're also using this to focus on sustainability and creating products that are more sustainable. In the last 18 months, we've rolled out a low-carbon caustic soda out of our German plants. We've rolled out a low-carbon PVC. We have the capabilities of doing that exact thing through our U.S. assets as well. As we look at our Epoxy business, we have now a bio-based materials going into our epoxy business. We're working in polyethylene on a single pellet solution that incorporates recycled materials. So our customers can buy a single product, and in that, create products that have a high recycled content. Our customers are asking for more focus on this, and we're making sure that we can use our R&D centers to deliver that. So I mentioned a little bit of our specialties. And as we go through that, Albert mentioned, of course, we're driving the specialties because we get a price premium. We can get a margin premium on those. And just a few examples here. Today, we are the #2 player in specialty PVC. Over a cycle, specialty PVCs have about a $0.20 a pound premium over commodity PVC. So we enjoy that, and that's coming out of our European assets from Vinnolit. And on the epoxy side, I mentioned 57% of our sales on the specialty side. Over a cycle, we have almost a $0.30 a pound premium on the specialties. Polyethylene, over 40% of our sales in our -- in the specialty area, a $0.15 a pound premium over an average polyethylene. And just the fact that we're in linear low and low, those also come just inherently with a price premium over generic polyethylene. Each of these, as we put this together, of bringing price premiums and barriers to injury as we get stickiness with our customers through our specialties and our specifications. So we focused a lot on our market positions. Let's take a minute just to talk about operational support, how do we run our sights and why that's important. I mentioned earlier, vertical integration strategy is quite important to us, and that's why we continue to ensure that we have both upstream and downstream integration to our businesses. Our gravitation towards specialties is really optimizing our price premiums. As we move to operating excellence, this is the way we run, and this is a key part of the Westlake operating model. For operational excellence for us, that's really driving a safe, efficient, highly competitive, highly reliable operations and make sure that we put that in place and then we have this continuous improvement DNA that continues to increase and operate those every day. And our last is our commitment to allocate capital in a way that creates value through growth. And whether that's our organic growth, our very low-cost debottlenecks in our sites, or acquisitions, continue to invest in these core areas that are the heart of our business. So we have a 35-year history of excellence in allocating capital, in operations and bringing returns. We invest with discipline to make our plants safe, to make our plants reliable and efficient. And we're continuously working to optimize the operations on our whole chain. As we invest in reliability in our plants, we can debottleneck or we can improve one section of a plant, and then we can, at a low-cost way, invest in the other parts of that section to increase and make sure that our chlorine molecule that we make in our ECU sites have the maximum value as they come out the end in PVC. Over the past 10 years, we've invested to leverage our feedstock advantage, our entire core vinyl chain and our specialties. And this has led to a 10-year average return on capital employed of 16%, well above our chemical peer group, and we continue to grow in this business. So we believe our strong footprint in the U.S. is really a key driver and a key differentiator for us. And just as an example with our large footprint in the U.S. and our large number of sites that we can debottleneck and incrementally invest in, we believe we've got a significant advantage from a CapEx point of view on creating capacity, very low cost. Just as an example, we're working today on debottlenecks in our EDC, our BCM, our PVC units, and we can realize those at CapEx costs significantly below a greenfield site, for sure, but also, significantly below a brownfield site as we expand and debottleneck our existing units. We even believe today that we can do this at less than CapEx that you would spend in Chinese on our Bronson site. We put the low cost -- the discipline in the low-cost investments, adding to the margins that's coming through the integration of the chain and our specialties. We believe this gives us a very strong piece on continuing to drive value for our shareholders through low-cost investments and margin enhancement. If you just look over the last 8 years, we've invested in our business to make us more competitive, to make us grow in reliability and specialties. Our investments in integration really start with growing our ethylene capacity all the way through the end of the chain, and we -- our ethylene comes in both our internal units as well as our joint venture at LACC. We've invested in specialties. Our business of purchase of Vinnolit in 2014 and Epoxies in '22 expand that. And we've invested in scale, the Axiall acquisition was a game changer for our business, setting us up with a very strong footprint of North American sites. And we've invested in operational excellence, digital initiatives to continue to drive our operating model into these sites to be more effective, more efficient, more reliable. So we believe you've got a very strong and reinforcing economic engine in the PEM business. We have a globally advantaged footprint. We have vertically integrated from ethylene all the way down to our hip products. We have a very favorable industry supply and demand outlook. Our strong focus on specialties brings price and margin premiums. We have a commitment to continue to grow the business through debottlenecks, incremental capacity increases, as well as looking externally for acquisitions. And we have an additional focus now. The digital tools that are available give us an extra lever to really automate and improve the efficiency of our sites. All of this driven to deliver return on capital and EBITDA margins above our peers. So I'd like to thank you this morning for just the time to go a little bit deeper into our PEM business. In short, we're a market leader in products that people need. Those leading positions are supported by best-in-class cost positions. We're creating growth both internally and externally through very cost-effective means. And now that we've got the acquisition of Epoxy, a whole new platform in which to execute our model and grow that. And our growth is coming at higher margins as we continue to push on operating excellence, strong discipline and a focus on specialties. So I thank you for your attention. I'm now going to pass it over to Bob to really go into details on our HIP segment. Thank you.

Okay. Thank you, Roger, and good morning, everyone. I'm Bob Buesinger, the Executive Vice President of our new Housing and Infrastructure Products segment. I've been with Westlake for 12 years, and I have 44 years of experience in the chemical industry and the building products industry. Fun fact. Over the last 10 years, I've had the pleasure to participate in all 9 of our acquisitions and the integrations. So as the farmers insurance guy says, we know a thing or 2 because we've seen a thing or 2. It's a true pleasure to be here today. I'm excited to talk to you about our new segment, the HIP segment, allowing Westlake to come closer to the customer and providing significant growth opportunities. Over the next 20 minutes or so, you're going to hear from myself and what has me excited and the rest of the Westlake team excited about HIP. First, we have a very strong market presence with several high-value product categories. We have significant growth opportunities, not only from favorable market drivers in the U.S. housing, but also increased infrastructure spend, but also, from integrating our recent acquisitions and then exploiting the cross-selling opportunities while optimizing our distribution network. Additionally, the segment complements our legacy business by diversifying the cycle exposures and leveraging the vertical integration opportunities that Roger just talked about. And lastly, our innovation product pipeline and our fragmented markets, which we participate in, provides additional growth opportunities. On a pro forma basis, our sales are roughly $4.2 billion, representing approximately 30% of Westlake's total. We're supported by 8,760 employees across 75 locations globally. Roughly 80% of our sales come from the housing market, which is evenly split between new construction and repair and remodel spending. The remaining 20% of our sales is related to infrastructure activity. As mentioned earlier by Albert, we have a very strong market position across multiple categories, which are highlighted in the middle of this page. For example, we're #1 in premium, PVC, and poly ash trim and molding. We're #1 in non-wood shutters, #1 in composite roofing, in concrete tile roofing and in clay roofing tiles. We're also #1 in architectural stone veneers. We're #1 in PVC fittings and #2 in PVC pipe in North America, and we are #1 in PVC compounds in North America. I also want to highlight how close we are to the customer, with roughly 80% of our sales going through one-step distribution. I'm on Slide 56, and this shows how we stack up against some of our public peers to give you a better sense of how significant we are in the industry. This has been achieved through several acquisitions executed since 2016, highlighted by -- on the housing side by the biggest opportunity, which came from our October 2021 acquisition of Boral Building Products, which significantly expanded our geographical reach and our product offering in North America. Slide 57 highlights our product portfolio that's made up of 4 businesses and their respective growth drivers. Starting with our Royal building products, which is a significant portion of our housing portfolio, you can see many leading brands under our umbrella. Looking forward, we see significant growth potential driven by an underbuilt U.S. housing footprint that's further supported by favorable demographics. Additionally, repair and remodel spend provides a reoccurring revenue stream with historic annual growth of approximately 5%. Moving to our Dimex, which is a manufacturer of consumer and industrial products from recycled materials, we see growth prospects driven by strong demand in outdoor living and matting products, along with consumer interest in the Made in America of sustainable products from 100% recycled materials. Our Dimex products, such as our No-Dig branded landscape and our MotionTex mats are sold through not only large retailers, but on several online platforms such as Amazon and Walmart.com. We are also a North American leader in PVC pipe and fittings and the only player who provides a value-add system solution that saves contractors time and money. As you can imagine, our pipe and fittings business will benefit from the infrastructure bill, particularly in the water infrastructure. Our PVC pipe offering is being adapted more frequently compared to other traditional pipe materials, such as iron and concrete. And lastly, Westlake's global compound business, with operations not only in North America but in Europe and in Asia. We compete across several markets, and we provide exposure to the electrification trends through our PVC-coated flexible compounds for wire and cable coatings. Other growth markets for PVC compounds include our medical compounds, our automotive compounds and housing compounds. Now, we're going to take a deeper dive and look at Westlake Royal Building Products and talk about our full suite of offerings in the housing products and our leading brands. We're going to talk about the favorable housing trends that are supportive of the continued growth of this business, leveraging our strong relationships with our distribution partners and explore cross-selling opportunities and product conversion opportunities. On this page, you can see our various different building product categories where we participate related to the home. We have a vast array of products that fall under these categories, each with different markets, different price points and strengths, but they all have one common feature, the Westlake sales channel. All of these brands under one roof means we can offer a variety of products that suit virtually every customer or distributor partner need, whether it's premium roofing materials, windows, siding, stone veneers, trim or plumbing, pipe and fittings. On Page 60, you can see the different solutions of our Westlake Royal Building Products brand. Within these solutions, we have almost 40 brands all focused on solving the end users' needs. This offering comes increasingly close to the customer, as 80% of the sales go through one-step distribution. We highlight growth opportunities across each solution, ranging from siding to trim and molding, our roofing products, decorative stone, windows and outdoor living. The growth drivers include strong housing demand, stable repair and remodel spend, displacing wood and other alternate materials and innovative products with low maintenance and installation costs compared to traditional building materials. Combined with the tremendous total addressable market opportunity relative to our current sales run rate, there's significant opportunity for continued growth in this business, both organically and inorganically. Moving to this slide, which you previously saw from Albert, we show this data about the favorable trends that drive the U.S. housing demand over the next several years, which will benefit Westlake's building products and our PVC resin business. Favorable demographics with increasing number of U.S. population in the peak household formation years is intersecting with a big shortage of housing supply. Under building of homes since the 2007, 2009 financial recession created a significant deficit in available homes today. Add to that the impact of COVID-19 pandemic, which is driving increased preferences for single-family housing. The graph on the top right shows that 2021 was the first year we finally had housing starts equal to the historical average, but there is still approximately 15 years of a deficit that needs to be made up. The bottom left chart shows the growing trend in repair and remodel expenditures as people start their families and remote work becomes more common. So demand for houses and then building products has increased. The availability of remote work has also led to an increase in demand for houses further from city centers, and people are customizing these houses to meet their needs. For example, rebuilding a larger home office space. Westlake Royal Building Products sells to a range of 1-step and 2-step distributors, and we have great relationships with many of the largest homebuilders. Our breadth of products and then on a national basis provides value to our builders and our distributors to meet their customers' building product needs. Our online design tools, our training and support for our contractors and tools like the One-Click contractor that allows for quoting from a handheld device helps drive business back to our distribution partners. Having a national footprint also appeals to our distributors as they consolidate their spend. As we integrate our newly acquired businesses, we have broader coverage across North America, offering a new larger selection of products in siding, trim and molding, decorative stone, premium roofing products and windows. Boral had operated their business as 4 independent silos determined and delineated by the product categories. By consolidating this and leading the business as one integrated entity, we have significant opportunities to improve both the customer experience and to operate more efficiently. This creates new cross-selling opportunities to provide a holistic building material solution to our distributor customers, our contractors and ultimately, the homeowners. And it also allows us to scale centralized functions such as purchasing and logistics. Boral Building Products has a strong presence in the West and in the South, which complements the existing strong presence of our Royal Building Products in the East and the Midwest. We're expanding our reach to support our distributors and our builders on a national basis. We have new cross-selling opportunities that include these premium products like true exteriors, poly ash siding and trim, our cement and clay roof tiles and decorative stones along with windows. We've expanded our product lines. We offer good, better and best products to appeal to every type of consumer. The next 2 slides are just 2 examples of the opportunities to gain share and drive incremental margin in our business. I'm on Slide 64. Homeowners seek beauty and performance and durability from our Royal Building Products. This includes lower cost over the product life cycle with no painting, no staining and no rotting. Our PVC trim and molding and our poly-ash trim and molding products offer a very low maintenance solution in place of traditional wood, trim and moldings. Over 80% of the estimated $3 billion trim and molding market is still wood products, so this represents a large conversion opportunity. Royal Building Products is a leading producer offering various trim and molding products for both the exterior and interior use in a home. Each 1% of market share increase translates to approximately $30 million in sales opportunities for our products. On Slide 65, we show our Westlake Royal roofing solutions complete, and we compete with premium roofing materials such as high-end asphalt roofing, cedar shake and natural slate, along with other metal roofing products. The total addressable market is about $15 billion for residential. Our DaVinci polymers, which is a composite roof material, along with our newly acquired plate tiles, cement tiles and stone-coated steel products all achieved the industry best Class A fire ratings and the Class IV impact ratings for hail protection, which is driving our growing demand. With this new broader line of premium roofing materials, we are well positioned to meet the needs of our customers across the nation. So next, we're going to talk a little bit about our Westlake pipe and fittings and our Westlake global compound business and how they benefit from several drivers, including secular trends driving housing demand, growth in consumer durables, the U.S. infrastructure bill and increased activity in electrification trends. Starting with our pipe and fittings, we see several growth opportunities. From our product offerings, such as our new PVCO, which is oriented PVC pipe, that provides a solution to meeting water delivery needs using 40% less PVC raw material. Our PVCO pipe is lighter weight and easier to handle for installers and is growing at approximately 8% annually, almost twice the growth of the traditional PVC pipe materials. Leveraging our value-added services, such as our solution systems that preassembled our pipe and fittings and saves contractors' time and money. Displacement opportunities, particularly PVC pipe is substituting for less durable and more costly alternative pipes, such as concrete and iron. We also see new opportunities for our LASCO Fittings business recently acquired, which tap into the electrical conduit fittings market and in Canada, the drain, waste and vent markets, to go along with our already strong positions in industrial, pool and spa and irrigation markets. Lastly, we think the water infrastructure spend from the infrastructure bill provides a $55 billion market opportunity for our products. Of the 1.2 million miles of water pipe installed currently in the United States, the average age of these pipes is 45 years old, with many of the iron and cement pipes nearing their end of life. And PVC pipe is the preferred material 65% of the time, according to a plastics today survey of engineers and municipal officials. I'm on Slide 68, where we show and highlight our Westlake Global Compounds business and how its innovative, rigid and flexible vinyl compounds form the elements of products spanning many industrial and consumer needs. Over 50% of our sales come from custom solutions, and this provides for a stickier relationship with our customers. We're a global leading formulator of PVC, wire and cable compounds, meeting the needs of a wide variety of applications to accommodate customer-specific requirements. This includes our PVC flexible wire and coating compounds that plays well to the electrification needs. As it relates to the U.S. infrastructure bill, the $138 billion earmarked for incremental spend on power grid and the broadband will translate to significant new revenue opportunities for our business. Finally, Westlake compound supplies critical compound formulations that support our medical, automotive and packaging customers. We're also the #1 global supplier of automotive dashboard compound. So the last part of this presentation, we're going to discuss driving operational excellence through HIP, as well as value creation leading to margin improvement the meaningful M&A opportunity in our markets and how we'll leverage our successful M&A track record. And lastly, how sustainability is embedded in our DNA. As we focus on Westlake's well-established operational excellence which includes quality and continuous improvement, we create value in HIP with additional production to meet demand. For example, as we work to integrate Boral, we are finding opportunities to dramatically increase output at our acquired manufacturing facilities by simply adding shifts and moving towards running these plants closer to a full 24/7 capacity, as we do -- as we consistently do in our PEM division. We're also implementing automation projects, including robotics for our materials handling that not only improves the safety of our operations, but also the productivity. We're launching our digital efforts and we now offer a consumer and customer portal for easy online ordering in our compound business, with plans to roll this out in our other business lines soon. Being an integrated supplier, we have access to multiple sources and various grades of PVC resin from our PEM group, and we have access to their technical and R&D resources that Roger mentioned, along with access to capital to fuel the operational improvements for our growth. With the recent acquisition and broader product portfolio, we've increased our opportunities to cross-sell the various products, along with additional value creation opportunities, leveraging our spend in procurement and logistics. Another benefit as we integrate our recent acquisitions is the strong talent that we've acquired and the best practices that we can learn and adopt. Slide 71 addresses the opportunity for inorganic growth. The building products market remains fragmented and provides ample opportunity to pursue acquisitions. So as you can imagine, there's meaningful M&A opportunity to leverage our strong M&A track record that's predicated on acquiring assets below replacement costs, improving our vertical product integration while increasing capacity and reducing our cost of production, focusing on new technologies and specialty products and penetrating new and current high-growth markets. Moving to Slide 72. This highlights our commitment to sustainability through both our products and our operations and the exciting business opportunities the sustainability leadership can offer. On the left side of this slide, we highlight some of our sustainable products in our business. Starting with our PVCO pipe that uses 40% less PVC while maintaining the same performance standards as our traditional PVC pipe. Our vinyl building products, which are durable and entirely recyclable. And finally, our Westlake Dimex products, which we recently acquired in 2021 that has been manufacturing consumer and industrial products using recycled PVC and polyethylene for over 25 years. The right side of this chart shows our stone coated and concrete tile roof offerings, which significantly lowers the attic temperatures compared to asphalt roofing and ultimately lowers energy consumption for the homeowner. Studies have shown that these cool roofing systems save up to 22% per year on heating and cooling costs compared to the standard composition asphalt shingle roof. So solving complex sustainability challenges for our customers is not only good for the planet, but it represents a strong opportunity for stickier customer relationships and higher margin sales. So on Page 73, in summary, within Westlake's Housing and Infrastructure segment, our strong market positions, which are top 1 to #3 in most of the product lines, along with our favorable housing and construction trends due to underbuilding during the last decade are driving both growth and margin. As we integrate our recent acquisitions, we continue to expand our production, improve on automation and deliver value creation. As previously mentioned, we're adding shifts to increase our operating rates to meet the incremental demand. We've recently rolled out our new Westlake branding at the business and product levels to consolidate our new brands within HIP. As we look to the future, we will continue to focus on organic and inorganic growth opportunities with an eye towards product innovation that supports our vertical integration strategy and considers adjacent and our current end markets. In addition, we plan to continue to grow our recycled PVC and polyethylene business, not only promoting sustainable products, but improving our margins along the way. So I'd like to thank you for your time today and for allowing me to discuss our HIP business that I'm extremely excited about. In short, we're a market leader in housing and infrastructure products. We're positioned for growth with favorable tailwinds from housing dynamics in the U.S. and supported by a decade of underbuilding and favorable demographics. We're creating value through product integration and cross-selling opportunities with our expanded offering of products, and we see further growth supported by increased spending related to the U.S. infrastructure bills. And we're positioned to drive margins by leveraging our low-cost position, our integration of our recent acquisitions and driving operational excellence throughout our organizations. Thank you for your time, and I'll now turn it back over to Jeff.

Thank you, Bob. So we'll now take some Q&A. I'll call the presenters up and we'll have some stools out here for the audience to ask questions. John Brennan is on the webcast system as well. For those attending virtually, please feel free to submit questions to John. I know we've already gotten 1 or 2 through that system. And I would just remind folks that Steve and Larry will be presenting after this, and then we'll have a further Q&A session. So I just encourage folks to hold questions around their sections for that second Q&A portion. We'll also we have all the folks back up here to answer questions about today's presentation on that second Q&A piece as well. And then just a quick safety item. If we do need to exit, doors' in the back and then we'll have an elevator bank, a behind -- or sorry, stairwell bank A behind the elevators that you would exit down to the ground floor on. David?

Thank you. Dave Begleiter, Deutsche Bank. For Al and Roger, can you discuss your thoughts on perhaps, molecular recycling and bio-based plastics for Westlake in the future? And could that be both organic as well as inorganic-type growth opportunity for you guys?

Yes. Maybe, I'll just make a quick comment on recycling in general. As Bob mentioned, all of our products are completely recyclable. What's interesting for Westlake is probably, only 5% of our products today are in single-use plastics. So most of our products that we're making are being used in very long-term durable applications. But we're still looking at how do we bring recycled content back into our products. Think on molecular recycling today, we're not actively looking at that. That's a relatively, I would say, a small piece for us. But we believe recycling in general, we're completely focused on to try to make sure we're bringing that back into our products.

Kevin McCarthy, Vertical Research Partners. A question for you on capital allocation and specifically, your view of M&A prospects moving forward. On Slide 16, you talk about the benefits of the combined PEM and HIP portfolio. And you mentioned that the PEM cash flow can support stronger investment in HIP and talked about the experience that you have, and obviously, you've done $4 billion of deals over the last 7 months. So is the game plan to harvest that commodity chemical cash flow and continue to grow the presence in building products? And if that's the case, maybe, you can talk about how you see that external growth market evolving moving forward?

Yes. Thank you for the question, Kevin. And certainly, as we think about using that capital allocation that really is looking at opportunities across the spectrum, whether it be looking at deploying the capital into the PEM business itself, such as we did recently with the epoxy business or into the HIP business to be able to grow into that space and expand the offerings that Bob just mentioned. Certainly, have the opportunity as well to reduce the leverage that we have. We have opportunities this year to reduce our capital -- our debt by about $600 million, as well as return capital back to shareholders in the form of share repurchases or dividends. So it really is looking across the spectrum. And of course, as we think about how we're allocating that capital, as Roger mentioned, making sure that we run those operations very reliably and consistently. So making sure those plants run consistently is, of course, job 1.

Angel Castillo with Morgan Stanley. I just wanted to dig in a little bit more, expand on that, I guess, on the CapEx side. So you talked about PVC, EDC or just vinyl-type investments. I think Slide 31 also included chlor-alkali, but it sounds like in other slides, you kind of noted a move away from merchant chlorine or some of these kind of maybe more limited markets. So could you talk about, one, what's kind of the CapEx we should expect for these type of investments, maybe, on the capacity front? What kind of size you expect? And then, yes, how are you thinking about your merchant exposure and kind of the chlor-alkali side of things.

Yes. So just quickly, I'd say we're -- continually, we've got a kind of a core CapEx that we need on maintenance to make sure that we stay reliable, we do that. In addition to, as I mentioned, we have very good opportunities on low-cost debottlenecks that margin increase, and that's really throughout the chain, including, I'd say, chlor-alkali, right? So we can actually start in chlor-alkali. We think, from a margin perspective, as we take that chlorine molecule and get it all the way to PVC, that's a great outlet for chlorine. And we monitor every month the chlorine outlets and the values of each set of chlorine and PVC is a very good one. So I will say, as we continue to debottleneck, we will try to look to get that throughout the chain.

Keith Hughes from Truist. Question for Robert on Slide 55 on the housing and infrastructure business to the EBITDA margin at 17%. Could you just sort of talk about the margins? And do you have a lot of variations, you have a lot of products in there? And what do you think you can get that to, as you do some of the integration that you discussed in the presentation?

Yes. And that's a good question. Thank you. Yes, we typically don't give forward guidance on the margins, but that's kind of -- it is a broad portfolio of different products in our housing, our new HIP segment. And so as you can imagine, there is a range, but through the different -- the efforts were -- that I described on our integration efforts and pulling this together, there should be room to improve going forward.

And I would note that the margins that you mentioned, the 17% margin really was a reflection of last year's full year run rate. And remember, we had a number of transaction costs related to the business that were embedded in that margin.

So that is included in the 17%?

It is, yes.

What would it be excluding it?

Well, again, as we think about the run rate of the businesses going forward, we're still guiding the business to really have mid- to upper teens margins in that side of the business.

Theo Van der Meer from Robotti & Company. For the vinyls expansion and the debottlenecking that you guys discussed, why is it that your ECU is so much lower than the -- if you could just kind of expand on why it's so low for you guys compared to your peers?

Sorry, I'm not exactly...

Slide 49, you talked about the estimated cost per unit for vinyl expansions and debottlenecking or your facilities. I'm just wondering why that's lower for you guys than your peers?

Yes. No, I think what I'd say is from a global perspective, if you can take an incrementally to bottleneck a small unit in a site because you have a lot of the off-sites already included, right? And that's -- so that you can do that at a much more reasonable price. Part of what I mentioned in the Axiall acquisition is we got a footprint of a lot of sites with a lot of units, which gives us a lot of opportunity to incrementally debottleneck.

Steve Byrne, Bank of America. I got a question for you, Albert. It really goes to why are you pursuing the Building Products pathway? I'm not suggesting it's a bad choice, I just want to know why do you think that it's a good focus of capital. You put up that slide that shows ROCE, 10-year average, chems versus building products, no real difference there. You're outperforming chems. Do you think you can do the same thing in building products or perhaps, maybe, even more because you could be back integrated or is it particularly fragmented and you can consolidate? What is it that you find compelling about it?

That's a very good question. We have been living in the chemical side. And with chemical, people call it cyclical, mainly due to the cycle of supply and demand. People add capacity, demand for chemicals, relatively speaking, they are pretty steady globally, is the capacity addition that makes it more cyclical. And hence, we move to the more specialty side on the chemical side. On the building part materials side, it's much less cyclical. It's more fragmented competitors. You don't have the giants, whether in the U.S., you have Exxon or Dow or the SABIC or Remco. And they don't have the fixed stock advantage that the Southeast may have and so on and so forth. So we believe that margin -- all of you investors, Wall Street, like to have high-margin business. And we talk to our colleagues here, we should have -- we'll have low margin business, because we don't want to have low margin. We're not going to have a lot of people rushing in to compete with you. What we care is we return on investment, it's not the margin. So if we can have a good return on investment with low margin, that's perfect for us, because they're going to have people rushing in building more capacities. And in the building point of business, the brand is so important. So you can have no name brands versus our brand. And one thing, also, is different from the PEM business and building products is that we offer a lot of warranty for our products. And some subproducts, we have lifetime guarantee. If you buy a siding, if doesn't fade, it's the property of a nice PVC siding, you don't have to paint it. And we have tested a lot, 20,000 hours and many, many to -- yes, to say, if we apply this technology, this, our product will last a lifetime and so on and so forth. So for people who will buy a name brand, a large company, they will pay a higher price because the assurance, comfort that the part the company will be there, like a DuPont products or GE refrigerator versus no name company or brand. So I think we talk about size, scale, the brands, these are not -- we created the brands. The brand has been there 20, 30, 40 years. We just have to acquire those assets. And some of those businesses were not national. The fact that now we can combine our business, you heard about the single that one-step distribution and a single brand in the Westlake. And part of the reason because of different companies, they want Axiall, they'll borrow -- we didn't borrow. They have all these brands, and they don't have a representation behind it and we use now the single name, Westlake on everything we do, from the chemical side to the Building Product sites, all in the Westlake. So we are building the Westlake name brands, all products. Of course, within the building products, we have [indiscernible] and clear sidings, all these names, but all under Westlake. And we feel that we can get a better price, a more long-term stickiness with not only customer, the end customer, but also the distributor. Whether the big boxes or the one that distributor, they prefer to work with us, we offer national reach, some small companies of the Northeast. And you heard with the Royal with Northeast and Midwest, with Boral, West Coast and South. So our national, lots of products, single company deal with, East of deals with our digital tools and quoting things. So we are bringing, I call it a bigger company mentality, lower cost and bring value to our customers, and this is why we think we can compete with the building products companies out there, which are primarily fragmented and some are smaller.

This is Charlie Rose with Cruiser Capital. But can I take that one step further because first of all, you've done an excellent job. You really deserve a tremendous amount, you and Steve and your team.

That's the team...

But I think the question in the stock market. Stock market doesn't seem to put a higher valuation on your earnings right now. It seems to have given you a 6 or so multiple of EBITDA. And I'm just wondering if the marketplace is suggesting that there's -- that the cyclicality has not been that much a race going forward. Or would it make sense to, at some point, you've done other things optimally before you've tried to create an MLP, would it make sense to separate the Building Products side from the more -- excuse the language, the more commodity side of the company at some -- some of 2-company situations where you sort of try to force the marketplace to recognize the less cyclical characteristics of the building business. And I appreciate your thoughts, but I give you a lot of -- you clearly have done a superior job. I just don't understand the marketplace doesn't seem to want to elevate the multiple in the current context of this -- this is a transformational story. But the transformational story doesn't seem to get legs to it at this point in time.

That's an excellent question. The Wall Street, which you are Wall Street sitting in this room, [ MYSC ]. And Wall Street in the past, they don't really care who you are or Westlake. You are commodity chemicals, cyclical, 5x, 6x multiple earnings, and we show that even compared with our peers, some of our peers included are specialty chemical company peers. You can see the names on the bottom. And they have much higher EBITDA multiple valuation. And yet, you can see the return, whether it's return or asset employed for share earnings, everything else, our returns are higher than the chemical average and building product average. So you're absolutely right, we've done -- our job as management is to create value, right? And how the value is valued, is priced by Wall Street, it's not us. We cannot change -- we cannot create price. You guys and Wall Street create the price. We deliver results. And not just 1, 2, 3 years, 10 years with public since 2004, 18 years of results. And we have some -- all the way back to 1986 when we first started. So our job is to create value. Wall Street, you value, how our results can be valued. Now, one of the reasons we have resegmented is precisely what you said. We have a vinyl building product business, and that's really embedded in our olefins and vinyls in the [ vinyl ] segment, and you just throw the same multiples. And actually, olefins and vinyls, the Wall Street throw the same multiple. They don't care comes from ethylene, polyethylene, PVC, caustic. You just throw 5, 6 easy, right, cycle, historical average. So we say, okay, we put all the chemical polymers, everything else in one group and we have the building post the HIP in another group. And our goal, hopefully, is to get some of the parts or close to it. But as many companies have done, if the market doesn't give value, we can always option to spin it off, separate to 2 companies again, right? So maybe the short -- long answer to your question, but it's a very, very important question.

Thank you. Sorry. P.J. Juvekar from Citi. Similar question. You look at all your acquisitions, they are further integrating your PVC into downstream products. But polyethylene is not further integrated. So would you direct more ethylene towards PVC in the future? And then, is polyethylene a core business, because your focus seems to be on PVC and downstream?

Okay. Good question. Yes. I would say today, we're about 1 pound billion short on ethylene. So we're purchasing ethylene on the outside market. We will continue to look at opportunities to invest in ethylene if it makes sense to continue to close that gap. No, but I think our focus on polyethylene, as we talked about, is very much on upgrading the value through the specialties. And we'll continue to do that, so I think our -- today, we don't have to make a choice because we're buying ethylene anyway. But if we can continue to integrate and to grow that, we'll do that.

Matthew Blair from Tudor Pickering. With this increase in mortgage rates, the valuations for some of your building products peers have really gotten hit. So I was wondering if that's opened up any sort of M&A opportunities. And then also on the demand front, have you guys seen any reductions in demand from this higher interest rate environment?

Right. Yes, good questions. First of all, on the -- we're watching the mortgage rate changes happening right now. And so we certainly have to be sensitive to it. But we haven't really seen much impact on the business at this time. Backlogs are healthy for our customers. We've talked to many of the large national builders and they are basically booked throughout the year on their ability to construct new homes. And it comes back to the slide I showed with the deficit of housing for the last 15 years. We need to make that up. So one trend that may happen is as interest rates move up on mortgages, people, their affordability gets trimmed a little bit. So they start looking at, okay, need a little smaller house. And I saw a report the other day that, that's already starting to kick in. People are, okay, I have to cut back a little bit because I can only afford this much a month and the mortgage rate is higher. So we'll look at a little smaller home. But we still think that the demographics and the demand curves look pretty solid. And did that answer your question?

Yes. Matthew, answer your question on the housing builders stock price come down, the multiples are still very high. come very, very high multiples come down a bit, it's still very high, much higher than ours.

There's still room.

Josh Spector with UBS. On Slide 46 in the PEM section, you showed some margins on your specialty products across PVC, polyethylene, epoxy, cycle averages. Curious if you can give us some context of how that's varied over the cycle, what the kind of magnitude of the change is. And with prices higher for chemicals broadly, has that premium expanded today versus where it's been, historically? And a follow-on to that, can you expand your tons that go into those premium products organically? Or is that a major CapEx investment to change the reactor system more broadly?

Okay. No, thanks, great question. I think I would say, when you look over the cycle, we put cycle average because it does vary. And the specialties tend not to move as much as the commodities, right? They're less volatile, which is part of what gains there. So in a year like 2021, when commodities go short and prices run through the roof, the margins would actually shrink a little bit. And then as they come back down, we'll see that margin expansion again. So really, across the board, the specialties are bringing extra, but actually, less volatility in that as well. And no, we can continue to move our products downstream. As I mentioned, in polyethylene, 80% of our reactors are auto play. We can continue to grow from the 40% we have through that. On our specialty PVC, those are coming out of our European sites. We continue to invest in once again, low-cost debottlenecks that allow us to grow that. So no, we can continue to move that direction. It's not a radical shift that we have to make.

Jeff Zekauskas at JPMorgan. Two questions. Over the next 5 years, do you plan to expand chlorine caustic capacity in the United States at any large scale? And secondly, for many years, you've been doing presentations and you talk about how in PVC, you really make money in chlorine and ethylene and really don't make any money in PVC. Given how the markets have changed, do you have a different view for the future or it just turns out we're earning a little bit of money in PVC now, but that will go away?

You want to -- on the first point?

Sure. Okay. I'll start off with -- on the capacity question. I think I tried to mention a little bit that we're committed -- these are core businesses for us, right? So we're committed to caustic chlorine, PVC through that chain. One of the things that we don't want to do is make large-scale investments to have low-value applications for these, right? And so as we continue to move the chlorine molecule into higher value-added markets, certainly, we'll continue to grow -- we have to grow the base to be able to continue to move that direction and grow. So we can grow our chlor-alkali and continue to move that, but into value-added applications.

So I don't understand what you just said. Do you plan to build a larger chlorine caustic facility or you don't?

I'm sure, in the future at some point, yes, we will continue to grow with that market. That's core for us. So yes...

Jeff, as you heard Roger said in his presentation that we continue to look at debottlenecks. These are very low-cost debottlenecks compared with U.S., greenfield or even compared to China. And that's -- it's embedded part of our -- we talk about $750 million to $850 million CapEx this year is embedded in those numbers. It's a very good question. I'm glad you remember what we said that we had a pie chart just in case some of you may not remember the pie chart that we said the whole vinyls chain from ethylene, chlorine to PVC, only 10% of the margins comes from PVC manufacturing. Majority is on chlorine and chlor-alkali and ethylene. And they switch between ethylene and chlor-alkali. And as you may know that U.S. today, the spot ethylene, I think, is in the high $0.20 a pound. And as Roger said, we are one of the biggest buyer of ethylene, over 1 billion pound short, lower the ethylene, the better it is for us, right? And whereas in Europe, the ethylene price because of the high oil price, it's in the $0.80-odd a pound spot price now, post-spot. So if you're saying U.S. producer, if you use those spot price, you're not making money, much money, a little bit of money, and all the money in PVC. So the 10% was over a cycle. And looking back, whether history repeat itself all the time in the future or not, we don't know. But right now, that U.S. PVC manufacturers, if you're integrated, is enjoying very good profits, as you can see from the numbers we reported. And there's not much new capacity being added in chlor-alkali in the U.S. And U.S., the only guy, we enjoy low natural gas price compared to the rest of the world, low power price, low sell price and so -- and low ethylene price. So it's fantastic. And the demand is still very strong. So hopefully, God forbid, the war will end quickly, and construction demand will be huge in Europe and other parts. So PVC will be very well needed for many of the products when it ends, and hopefully end soon.

Jeff [ here ] gentlemen, we'll take our last question on this side of the room for this Q&A session.

Mike Sison, Wells Fargo. Just 2 quick questions. I think there are some concerns about potential slowing in demand, maybe heading into recession. Can you maybe talk about how each of the businesses, the new sort of businesses would react? Would it be able to return its cost of capital? And then I just had a interesting follow-up just because I read the recent Elon Musk book. So I mean, where is caustic soda and EV? And how big is that business? And where could that go longer term?

Well, I'll say something and my colleagues can -- we have a lot of experts here. So usually, I don't have experts here to start me off. But let me just quickly say that part of our PEM business really they are essential. When we went -- business went down with pandemic starting in March of 2020, many plants shut down. The Building Products plant will shut down because people aren't allowed to build buildings or houses. So demand went to nothing, oil price went negative $40. But our products, whether it's polyethylene for packaging or caustic and chlorine, water treatment and disinfectant, as I call it, essential industries, our people are allowed to go to work and very quickly the government opened up the building products, you're allowed to make pipe and everything else. But people need them. So if a recession comes, obviously, the margin will get squeezed across the board -- but I think the demand for essential products will be there. On the HIP side, you heard that we reported 50% of our business, especially in housing, goes to repair and modeling. So if you look at the repair and modeling, pretty much, it goes up -- actually every year going up and people they don't have the money to buy a new house, everything else to do a new house, they remodel their house. And our product, a lot of that goes to repair and remodeling. So that's -- Yes. we were always -- we've been discussing internally what about the recession in Europe, what about the recession in the U.S. or Asia, how do we control our cost, what's the competitive advantage for our competitors. U.S. still, by far, has the lowest feedstock cost. Is that right? So our products, the PEM side, we can still outcompete the rest of the world. So we have our advantage, but rising tide, lift our ship, lowering tide, lower our ship. But we won't be the guy who is better than the rest of the crowd, all this information compared with our peers, probably better than our peers on a global basis as well as well as the U.S. Yes.

Maybe, I'll just make a quick comment on the EV. So I mentioned earlier that I calculate is about 4x as much caustic in an EV. And a portion of that is certainly on the mining side because we have to mine the lithium. We have to bring that through. But to making the batteries, a lot of aluminum, and that's a very high user of caustic soda, metal in general. And the EV has a tremendous amount of wiring in it. In fact, so it's good for our PVC business as well as we continue to grow that direction. So the move to EVs is quite positive for our business.

We have one more question.

Bob Robotti, Robotti in the company. You have the chart of what you do in the Building Products business and you said the different products here. So I imagine, acquisition opportunities are in a number of those places, you're #1. So therefore, you have probably some issues, but I guess there's still geographic opportunities to build out those products? And then I guess, in windows and outdoor living, you have relatively low share. Clearly, that's a big area of opportunity. Is that correct? And would you add other products? Are there 1 or 2 other products that kind of build out the home that you're not in today that you would also look on as an add-on to growth opportunities in the Building Products segment?

Yes. Thanks, Bob. Good question. And yes, I would refer you back to our -- that picture of the house for our building products. That whole area is something that we would take a look at. There are -- we do have leading positions in a number of products, but there's room to still grow. And then also, it's a very fragmented industry, as Steve and Albert have mentioned also. So there's a lot of opportunities still to grow our footprint from more of a regional player, for instance, to a larger national player. And then ultimately, there may be opportunities to extend this platform beyond the United States and Canada, which is where we really focus right now. So there's plenty of construction and building of homes in other parts of the world. So that's also an opportunity.

Great. With that, there's one question to take from the webcast system, and I think we'll end this session, let people take a quick break for the restroom and then return with the latter part of the presentations with Larry, Steve and Albert and have everyone back up. The quick webcast question is, we have our 9 R&D centers in the presentation that you went over, Roger. General question kind of some of the stuff that they're working on from an R&D perspective. And specifically, I think there's one in Mero, Pennsylvania working on water aspects and what some of that is specifically?

Yes. So maybe -- I had a couple of key points. This move to specialties, as I mentioned, across the board, whether it's polyethylene and PVC or in the epoxy. So a good portion of that R&D is working on those directions. From a sustainability point of view, how do we really create higher levels of recycling, lower carbon footprint on all of our products. That's a second area of focus on that. Our site in Pennsylvania is a water treatment site, and so we're working on a we continue to use the chlorine molecule in various forms for water treatment. So I'd say those are maybe a couple of key aspects and key areas that we work on.

Right Thanks. With that, we'll take maybe, 5 to 10 minutes for people to grab water, use the restroom and then return with Larry on sustainability. So I definitely want to come back to the room. [Break]

Okay. We're going to restart in 30 seconds, if folks can take their seats. And just to briefly mention to the group, at the end of the presentation today, we do have a gift for all the folks who are here in the room for us that uses one of our products. And so I think you'll all find that as a interesting memento from the event and something that's specific to Westlake. With that, I'll turn the presentation over to our Head of Sustainability and Corporate Development, Larry Schubert.

Well, good morning. Good morning, everybody. Welcome back from the break. Really happy to be here. Really happy to talk about a very topical subject, sustainability. Quickly, I've been with the company for about 10 years, and I've been in the industry for over 40 years with a background on the business and marketing side, a background in corporate development and a background in the sustainable area. So if you look at this slide, and building on the comments that Bob, Roger and Albert had all made, our passion and the long-term results and some of the things you talked about even at the Q&A, it's deeply rooted from our inception in 1986. So these core values, which Albert had put up as one of the first slides, with health, safety and environment, people, quality and continuous improvement, competitiveness and citizenship means a whole lot to us. It really is the basis in which we do everything. And this sustainability logo on the right side of the slide, I think, is a good way to encapsulate an area that is much talked about, very broad-based, very far-reaching. And how do you sort of get your arms around it? So I would start there and talk about product offering. And you heard it through both the PEM and HIP thing. What that means is our products. As we try to be sticky, as we try to be close to our customers, as we try to work with them, that's important. You see the portfolio changing. Communications to the key stakeholders and transparency. And we think we've always been that kind of company. We mean what we mean, and we say what we say. And we stand behind that. ESG ratings. Wow, what an area that has exploded in the last few years. Clearly, clearly, a yardstick of progress, so a very important part of sustainability now. Trade association voice. And in my later slides, I'll talk about this a bit more. But it certainly allows our commitment and our critical mass to be even broadened further. And then site footprint. I mean, it goes without saying that we need to be stewards and we need to be very mindful of the resources and how we can minimize those resources that we use in the future. So it's just a good way to take several different aspects of sustainability and think about them in those particular, say, categories. For those of you that are familiar with materiality matrix, they're a very important component of helping to prioritize your sustainability efforts. And this materiality matrix, which is in our 2020 sustainability report, it was helped and led by a third-party leading research firm. And it focuses you on both internal and external stakeholder key issues. I think the important thing is the conclusions that we got from this reinforced the importance of our 5, what we call, ESG pillars. And they're visualized, tried to color code them, if you will, in this chart. Resilience. Resilience is, we're here today, had the chart from 1986 to today and that we're going to be here long into the future. Operations. I spoke to it a minute ago. We need to be very good stewards of what we do. We've got, as Roger and Bob said, over 100 sites now. How do we make sure that we're operating them as good stewards? Product offering, which we keep mentioning over and over. I think we're quite proud of our progress on continuing changing the products to fulfill our customer needs. People. People are at the root of our company. You'll hear it again and again from our leadership team, and we need to make we're operating safely. We need to make sure we're recognizing diverse views and all of those things around people issues. And then community. Community is about giving back, giving back as an employer, giving back as a neighbor, giving back as a partner. So you keep hearing about our mission to enhance lives every day. And I think -- especially in Bob and Roger's drill downs in both of our segments, we talk about all of those ways that we improve life, improve quality of life. And our products in all kinds of solutions, transportation, nutrition, packaging, health care, water infrastructure, I think show that. I mean, there is a great example referenced on this slide about intravenous bags and dialysis machines, which our products go into. Certainly, those enhance lives every day. I think in the Q&A, Roger might have stole my thunder here, but we talk about our products predominantly used in durable applications. And I mean, I think a great example is the PVC pipe example because when we read in the news about our water infrastructure, and you talk about clay tile or the ductile iron and all the leakage and the breakage and the water waste, PVC pipe is such a great solution to making sure we use water efficiently. And I think our commitment not only as a company but to further broaden it is also shown in our membership in these various associations. The Alliance to End Plastic Waste is a very far-reaching effort, 60-some-odd companies through the whole supply chain of plastics now, including consumer companies, that's singly focused on being an example to end plastic waste. The Flexible Packaging Association, which our polyethylene specialty goes into, is looking at lightweighting solutions and packaging opportunities that again are efficient uses of materials. Materials Recovery for the Future, or MRFF, maybe something most of you know less about, but it is a pretty large research effort to deal with difficult-to-recycle products and how do we get those into the recycle stream. So we think that's a very important initiative to be part of. And then the Vinyl Sustainability Council, which really involves itself with the third-party sustainable verification efforts. Product innovation. In a way, this slide ties together our well-positioned platform and servicing the customer needs. I think we already hit about it on each of the previous presentations. But I think what it shows is the evolution of our product line and I think the question and the highlighting of our R&D centers. I think when you look at the product showcase, when you look at -- if you saw the video this morning with the customer testimonials, how do you get and stay close to the customer and ultimately to the end users so that we're bringing products and continue to evolve our product line? So those are products that are needed and wanted and help again to not only enhance lives but deal with the sustainability questions. And I'll mention a few of them, but I think we've gone over some of them. The caustic and PVC, which we've now got a product called GreenVin that has renewable power and it allows for a lower carbon footprint to that product. The one pellet polyethylene, I think Roger mentioned that, but that both allows our customers to get their pellet that already has recycled content in it for both convenience and consistency. Through the acquisitions, Dimex uses a tremendous amount of recycled industrial -- post-industrial recycled product. The Epoxy, the former Hexion business, the lightweighting, the wind turbines, automotive, aerospace lightweighting, I mean, our PVC compounding area, we've got a product line now called Aspire, a phthalate-free with bio content in it. And then the PVC, there's PVCO, which is a tremendous lightweighting and strength product. So the stable of products is evolving, and we're quite proud to have this stable of products as we continue on that sustainable effort. We're always looking to deliver our critical products reliably and affordably but also with an efficient footprint. So we've made steady progress in reducing our emissions, waste, our water usage, and we'll continue to do so. I think the chart here, and Albert had referenced it in his slide, shows our carbon dioxide reduction even as we've gone through all these increases in production. You may have seen the recent announcement where we said that we will reduce our carbon dioxide intensity by 20% by 2030 for Scope 1 and 2. Our strategy is to optimally allocate capital to both proven and emerging technologies, includes energy efficiency projects, securing power from less carbon-intensive electric providers and a lot of other continuous improvement projects. We do anticipate additional announcements broadly across our ESG portfolio in the future. Commitment to safety for our team and for our community has always been a core value and always been a top priority for Westlake. Our recordable injury rate has consistently been in a place that put us in the top quartile of our industry. The words of our founder, T. T. Chao, are prominently displayed at each location but importantly, I think, are embedded in our culture and are lived every day. And I think the comment life is precious and irreplaceable, a reminder of, after all, we're about our people. In addition to safety, we are really committed to caring for the communities in which we operate. Our support takes a whole lot of different forms, depending on need, donations of moneys, donations of goods in kind, employee volunteering as well as charitable contributions. In Southwest Louisiana, where we're a major employer, our United Way drive is the largest drive in that area, and it raises about $1 million each year. ESG. Based on our operational excellence model, ESG receives the same attention as the key pillars in our business. It's overseen by our Corporate Risk and Sustainability Committee, which is part of our Board of Directors, and has got good visibility at that level. I do a run point with our executive leadership team on sustainability issues, but it is a key focus for each of our business lines. We do align our sustainability work with the leading practices from SASB, GRI, EcoVadis, and we are continuing to work on TCFD. So to summarize, and back to there's a lot of different buckets here, our approach is very broad-based. It's grounded in sustainable business practices, which goes back to operating safely and efficiently at our sites; proactively solving environmental challenges, talked about carbon goal, our usage of resources like water, NOx and SOx; innovating for our customers and for our future, adapting our product offerings, utilizing our unique R&D and our specialty portfolio; advancing a circular economy and leveraging our effort in supporting these trade groups that I've discussed; and then pursuing ambitious and optimistic outlook, continuing to grow, as the other speakers have spoke about, consistent with our value and in the areas as outlined by the other speakers. Thank you. At this point, I'm going to turn it over to Steve Bender, our CFO and EVP.

Well, thank you very much, Larry, and good morning. I'm Steve Bender, and I bring over 40 years of experience within the industry. And it's certainly a pleasure to be with all of you this morning and share with you that exciting vision that we have of driving value. I joined Westlake shortly after the IPO, and that growth engine that has been driving the company since its founding in 1986 has gotten stronger. And I hope that you see that as you go through the presentations today. The opportunities you heard today lay out the strategies and the steps that will continue to drive that growth engine. So let me start with outlining what you'll hear from me over the next few minutes. Our proven track record of strong EBITDA margins and the returns have been driven by the 6 key elements that you see here. A highly integrated platform that drives high operating rates, along with a specialty product mix that both Roger and Bob discussed, along with a quality asset base and a disciplined focus on capital allocation, has provided those strong results. Second, integrating these acquisitions and capturing the synergies that you've heard us talk about, achieving the full run rate of earnings potential that we see in these businesses, provide significant growth opportunities and margin enhancement opportunities and continues to drive the business forward. Third, the compelling growth opportunities we have discussed today really highlight the opportunities we see in both segments. In HIP, the building products industry, as Bob mentioned, is a fragmented landscape of market participants. While our portfolio already serves well customers with a very wide array of higher value-added products, there still are many opportunities to add to the portfolio, and Bob outlined some of those this morning. In PEM, there are opportunities to debottleneck that Roger mentioned, and we've talked about those today. And there are certainly more in the upper sleeve that we have the opportunity to pursue. We'll look for opportunities not only organically but also for inorganic growth opportunities, and there's certainly areas to expand on that front as well. And fourth, we have a track record of maintaining a very strong balance sheet, which is very important because it allows us to act opportunistically to continue to grow the business. So pulling all that together, the outlook is bright at Westlake as we leverage our low-cost position and specialty product mix and realize the benefits of the recently acquired businesses and remain focused to be able to pursue the opportunities and meet those strategic and financial criteria that we've set out. Our track record of delivering strong results and the strategic moves in the businesses and the product mix that we have further downstream into the specialty markets and the high value-added leading brands that Bob outlined, coupled with our opportunistic growth initiatives, have positioned us for continued bottom line EBITDA growth and, of course, creation of shareholder value. We see many opportunities to build on our market positions with branded products as well in the HIP business as well as continue to grow our opportunities in the PEM side of the business. These will drive revenue, EBITDA, free cash flow and, of course, EPS. So let's talk about capital discipline. Capital discipline is deeply embedded in Westlake's culture. The 6 elements you see in the lower left-hand corner here highlight really how we've driven that growth. We've driven it through organic opportunities and inorganic opportunities. And the consistency of this culture has delivered year-over-year results for over 10 years, as you can see, and of course, outperforming our peers in margins and in returns. You've seen this chart. Our focus is on bottom line performance and delivering these peer-leading returns that have been reflected in the stock price as we have significantly outperformed the S&P 500 and our peers, going back all the way to the time that we were IPO-ed in 2004. This performance is driven by our capital discipline and focus on profitable growth. Westlake is well situated to continue our profitable growth with the leading market positions in PVC, caustic, polyethylene, Epoxy and the value-added products that you see in Bob's portfolio that are supported by the significant opportunities we see in the R&D labs that we have and the innovative product pipeline. We think our positioning in the markets creates a very competitive moat that I think is well protected with multiple avenues to continue that standout performance. Our balance sheet allows us to fuel our growth objectives. It allows us to continue to debottleneck as we see growing demand to invest in R&D and to continue that product innovation pipeline as we look for opportunities there as well as for bolt-on acquisition opportunities as they come along. And you'll continue to see us bring forth a broad array of sustainable products to serve our customers' needs. On this slide, I wanted to highlight a number of organic and inorganic investments that have really strengthened our overall portfolio with specialty performance materials and the many high value-added brands that you see that we offer. These investments have significantly enhanced our market position, whether it's in product mix, advantaged feedstock opportunities or production capacity. On the organic side, our investments are built on chain integration, and market demand stories continue to look very positive. Together, these investments created a highly integrated production platform that allowed us to keep our cost low and very competitive with integrated advantages that also meet those demands of our customers. On the acquisition side, we've acted on trends that we see develop that all have favorable tailwinds in areas such as housing, lightweighting, EVs and renewable power. We have successfully completed those 4 acquisitions you heard us talk about just over the last few months totaling $3.8 billion, and we continue to maintain a very solid M&A pipeline. On this slide, I wanted to lay out some of the areas where we see significant near-term upside that you can expect us to capitalize on. First and foremost, a structural short supply in the chlorovinyls space globally. As the world's leader in that space, we're well positioned to benefit from demand that's been growing faster than supply has been introduced in the market, and it's really tightened up the supply-demand dynamics. And this is where the integration chain between our PEM and our HIP business is important because we produce all the resins necessary for our Housing and Infrastructure Products business to meet that global construction demand we see. In consumer packaging and durable products, we're very well positioned to support consumer packaging solutions that meet customer sustainability needs. The growing trends in lightweighting and EV, wind energy adoption all play to the strengths of our global Epoxy business. We're well positioned in our HIP business to be able to address that structurally short position in housing that Bob mentioned. You saw in Bob's slides, family formation and the shift in demographics in the United States, combined with the work flexibility that many employers are providing to employees, provides homebuyers the ability to seek more living space. And that living space need is translating into more residential construction activity. And this is where we think we're very well positioned to be able to capture that demand as we continue to see a strong market and strong tailwinds behind us. Macro demand trends that we saw that drove these 4 acquisitions are quite strong. Electrification, EV, renewable power is really driving demand for these products worldwide. As a global leader in all of these markets, we're well positioned to address the long-term needs we see. And given the strong demand backdrop that we see in housing construction, LASCO Fittings is a huge addition to our existing Pipe & Fittings business, which allowed us to serve a full range of PV fittings requirements. The Boral acquisition dramatically upgraded our branded set of building products and expanded our geographical reach in the housing and residential construction markets. And of course, Dimex brings a wide variety of innovative, sustainable products to the table. As we have seen this year, a strong year in 2021. But as we look forward, we have the ability to have the full year run rates on all these businesses we've acquired in 2022 and beyond. And they provide a very compelling earnings profile as we look forward into '22 and beyond. And finally, since we've scaled up our HIP business, it's worth mentioning that it's far less capital intensive and on a different business cycle than the PEM business and providing a less volatile earnings profile. Our earnings growth is also supported by a number of capacity additions delivering near-term and long-term value creation, notably those that Roger mentioned in EDC, PVC and VCM. As Roger also mentioned, Epoxy is positioned to benefit from long-term structural demand drivers for our resins, given the mega trends that we see in the marketplace. In the HIP business, we're seeing very favorable housing trends in the North American market, supported by factors such as the change in demographics that he outlined and also the ability to be able to work with more flexibility from home. The significant underbuilding over the last decade has also been compelling driver for demand. And it's also worth mentioning that the stability that we see in the repair and remodeling market, which is half of our building products business demand, is significant because it really brings a nice steady growth to the demand picture, growing at about a 5% compound annual growth rate over the last 30 years. Additionally, the infrastructure bill that was passed by Congress in 2021 provides long-term tailwinds for the larger diameter Pipe & Fittings business. This also brings an ability to accelerate the product substitution that we see an opportunity for removing lead, iron and concrete pipe from the nation's infrastructure systems and allows us to bring in a much more sustainable, more cost-effective product, PVC pipe, that doesn't have the installation problems and the water leakage problems that these other alternative pipe solutions have. Overall, we're extremely excited about the market tailwinds and the platform that we offer today. So I'd be remiss if I didn't talk about the balance sheet. We've invested over $10 billion in acquisitions and organic growth initiatives since 2015, all the while, while maintaining a very strong balance sheet with solid investment-grade set of financial metrics. In fact, if you look at the ratings that we see assigned by the agencies, you can see that we actually outperform the ratings metrics that all 3 have provided. And the strength that you see in our balance sheet is not only for now, but you can see that we've maintained very strong financial metrics all the way back to 2015, in fact, even prior to that. The importance is that it allows us to act swiftly to improve the business and grow the business to allow us to further specialize, driving better margins, and improve the portfolio. Westlake also has a master limited partnership that provides a very attractive form of equity capital. It's allowed us to monetize units when the market position is favorable. We raised over $500 million at a multiple that's more than twice the multiple of Westlake today, and it provides an avenue to obtain capital that we have -- that we can use that we don't have to rely on our leverage or free cash flow all the time. As we think about the investment criteria to grow our business, we look at adjacent platforms to our existing strong foundations in both HIP and in PEM that improves our vertical integration and strengthens our cost position. We're always looking for where we can invest, invest opportunistically, potentially below replacement cost by bringing in new products and new technologies into the business. And of course, these attributes set us up to drive profitable bottom line growth that is defensible over the business cycle. We have very favorable market conditions in both of our business segments. Our growth strategy is supported with that strong balance sheet that I just mentioned, and our sales are driven by products that customers need, increasingly driven by sustainability needs as we see going forward. We're continuing to always improve the business, and our continuous improvement process drives investment in digital and automation. Whether it's in AI, machine learning or robotics, these innovations have already delivered tens of millions of dollars of savings a year at Westlake. We're ramping up those kinds of investments across the business from plant operations all the way through to the back end of our business that all support our customers. We've talked about the EDC, VCM and PVC debottlenecks that will be delivered significantly below U.S. Gulf Coast brownfield capital cost. It leverages our caustic and PVC chain, and we expect return on capital to be in excess of 15% over the cycle. Of course, the newly acquired businesses in the building products business and the Epoxy business offer exciting growth opportunities as well. In the HIP business, as you've heard from Bob, we also are driving increased automation, improvements in logistics and expanding our production. These opportunities allow us to drive operational excellence in our newly acquired businesses, and there are many apparent opportunities to improve the business. Bringing manufacturing mindset that Bob mentioned coming out of the PEM business further into these acquired businesses will yield both operational efficiencies and allow us to more nimbly serve our customer base. As I mentioned, capital discipline is really deeply embedded in Westlake's culture. We're very focused on getting a return on that capital. So allocating capital is integral to how we think and act. We have a highly integrated production chain, and we prudently invest to make sure those plants run reliably. That high degree of reliability allows us to run the plants at higher operating rates, keeping our cost per unit quite low. On the inorganic side, capital is focused at acquisition opportunities both in PEM as well as in HIP that have compelling returns above our risk-adjusted cost of capital. Beyond these opportunities, as I mentioned earlier, we have an opportunity to retire debt this year, $600 million at least, as well as return cash back to shareholders in the form of dividends and share buybacks. So as we think about the opportunities to allocate capital, we look across the waterfall and look for ways in which it has the best return to our shareholders. The successful acquisitions remain an ongoing driver of Westlake's growth as you've heard today, but it fits into the larger picture of how capital is used to grow our business strategically with compelling returns. We've built the business through debottlenecking expansions, greenfield expansions in some cases and acquisitions. The investment criteria shown here are used, whether it's an organic growth opportunity or an acquisition opportunity. These criteria are the filters that we use on many of these opportunities that come our way. We make sure that they are really focused on the bottom line growth and with compelling returns. So when you look at this chart, you can see the stepping stones that are built on the rock-solid foundation that Westlake has today. Our essential materials go into the industrial and manufacturing industries that are growing in line with global GDP. Our specialty PVC, polyethylene, Epoxy are important elements in consumer products such as medical packaging, coating and consumer applications and food preservation. Our composites serve the automotive, aviation and electrification markets, and these all grow at a multiple of global GDP. And of course, housing and construction demand and repair and remodeling markets are growing at least in line with global GDP or better. So let me spend just a minute and orient you around what we see as our economic engine. It's really built on 4 pillars. First, our core advantages, integrated feedstock advantaged, specialty branded products in markets with leading positions with a very favorable demand backdrop. As you've heard today, we have leadership positions in our markets, being #1 through #3 in all of our product categories. Second, the organic growth enhancers. We have numerous debottlenecking opportunities, a superior R&D. And you couple that with the innovative product pipeline that we have, it brings a wide array of leading products to the market. These top-tier positions continue to give us opportunities to penetrate the market and for cross-selling opportunities. Third, acquisition opportunities that are bolt-on to our core business, that leverage our market position, expand our existing array of products and improves our structurally advantaged integrated chain. The 4 acquisitions that we just mentioned and just completed really provide new platforms for growth and new end markets for us. Fourth, margin enhancers. They expand our specialty and branded product portfolio in high-growth markets with higher-margin applications. We continue to harvest the benefits from the digital initiatives that I mentioned. And of course, those drive bottom line results for our synergies. And of course, you'll see the acquisition benefits as well. The outputs from this economic engine deliver EBITDA margins and returns on capital that really outperform our peer set and bring strong cash flows to Westlake. This is the economic engine that we've used since our founding in 1986 and will continue to drive the business going forward. Before I turn the presentation back over to Albert, I wanted to highlight a few key messages once again. First, our track record of driving growth and improving margins speaks for itself. Second, we're in the early stages of realizing the true earnings power of our recent acquisitions and improving margins in all these businesses. Second -- excuse me, third, we have a very compelling multilayer growth story across all of our segments that really provide us multiple organic growth opportunities. And lastly, a very strong balance sheet, well-established M&A skill set that supports ongoing opportunities to add extensions to the portfolio with financial returns well in excess of our adjusted cost of capital. Albert, with that, I'll turn the mic back over to you.

Thank you, Steve. I know I'm sitting between you and lunch. So let me wrap up our inaugural Investor Day presentation and leave you with a few high -- important high-level thoughts. Westlake's portfolio is quite different today from what it was just a few years ago. We have transformed the company into a leading producer of products that improve and enhance people's lives every day around the world. Our transformational investments have moved our business further downstream into specialty materials and high value-added leading brands with opportunistic growth initiatives and closer to customers. Our Performance and Essential Materials business is a leading producer with low-cost positions as well as growing positions in specialty markets with favorable supply-demand dynamics, and we have near-term attractive opportunities to debottleneck and strengthen our integration across product chain. We have built a Housing and Infrastructure Products business with market-leading positions, with a broad array of products that coupled with strong secular U.S. housing trends to support long-term growth. As you have heard, we have multiple areas for self-improvement and significant top line and margin improvement opportunities. Westlake is well positioned to execute on our profitable growth plan. We have a globally advantaged feedstock position and have shifted our mix of specialty products, moving more downstream with higher margins. And we're integrating our recent acquisitions, and we'll be getting a full year's earning in 2022 on these new businesses while continuing to drive margin and operational improvements throughout Westlake. Capital discipline is deeply embedded in Westlake's culture with a focus on driving economic value added while also driving free cash flow and keeping a strong balance sheet. Westlake is committed to sustainability and ESG while maintaining our growth plans. Incorporating recycled materials into our products, producing durable products that enhance people's lives every day, remain our core mission. We believe the future is extremely bright for Westlake, and Westlake's investment opportunity is as compelling as we can see. Thank you for spending your time with us today. Now we will take your questions. And after Q&A, we are inviting you to join us for a good lunch, hopefully, and continue to learn more about Westlake's over lunch and also meet some of our leadership. So ladies and gentlemen, thank you very much again.

Switch up the order? Yes, change the order.

Kind of try to start from the back up the opposite direction before with the Q&A.

Arun Viswanathan, RBC. I have 2 questions. So first off, on Epoxy, it does appear there's been some really strong structural changes and improvements in the margin for that business. I think a couple of years ago, we'd seen 0 and kind of single-digit margins on EBITDA. What really changed, I guess, in the last couple of years? And do you expect kind of double-digit margins going forward? Or is there more rationalization that needs to happen in China? That's my first question. And then secondly is a little bit more longer term. You've achieved 19% CAGR in EBITDA over the last 10 years, 26% free cash flow CAGR. Arguably, you're a little bit growthier now. You have potentially less cyclicality, less capital intensity if you look at CapEx to sales. So if we look forward the next 3 to 5 years or so, do you expect those CAGRs to be above that historical and prior level? Or how should we think about the future kind of growth algorithm at Westlake?

Answer the first question.

Yes. So thanks for the question. I think on Epoxies, a couple of things. We've seen this -- the growth in wind energy is a big driver, and that's certainly helping to drive and tighten that up. Even if, with COVID, aerospace slowed down a little bit, so we're expecting to see the aerospace pick back up. And the third growth driver there is really on the automobile side. As we continue to move to lightweight cars, there's even future opportunities. So I think we've just seen a quite significant tightening of supply/demand, wind energy driving a fair bit of that. As far as you mentioned capacity rationalization, today, we're in a relatively good spot. Certainly, some capacity will come in, in China. But China is continuing to grow significantly on their downstream uses of that. So I think we're in a reasonable supply-demand balance.

Steve, go talk about...

Yes. And so Arun, on the question on the outlook, as we think forward 3 to 5 years, I would say that certainly, you see the path that we've laid out for you today with the economic engine laid forward. The favorable market conditions that we see in both our PEM and HIP business and the new platforms that we have today, certainly, those are high standards that I think we've historically set. But certainly, that sets the bar for us to continue to drive forward. We certainly have the focus of driving bottom line value. And certainly, we're very focused on returns. So as we think about putting that free cash flow to work, it is very much focused at really achieving those kinds of returns that we've achieved historically. It sets a really good bar for us to pursue and go forward in the days ahead.

Mike Leithead from Barclays. I wanted to ask on M&A, particularly on the chemical side because I think a lot of the questions so far have been on the building products for inorganic opportunities. But what should we expect? Or what are you contemplating on the chemical side? I think within your core markets here in North America, there really isn't much more consolidation opportunity. Is it new chemistries, new molecules? Is it international growth? Maybe if you could just flesh out kind of what you're looking at for inorganic growth in the chemical side.

Yes. So I think a couple of things. As you mentioned, we -- the beauty of having the #1 or #2 positions is it makes us pretty strong. It limits probably some of our M&A. But we still have, say, on the Epoxy side, this whole new platform. We've literally owned it for 2 months. We're just looking right now at how do we continue to grow that upstream, downstream and expand that. So I'd say in the short horizon, that would be the place that we'll be looking to understand that business better and where can we possibly leverage that.

Matt DeYoe from Bank of America. So like a number of market participants have taken a view that European energy prices are just structurally higher here. One, I guess, do you agree with this? Two, if you do, what do you see as the longer-term outlook for chlor-alkali profitability in Europe? And three, does a higher European production cost raise the floor for U.S. prices and U.S. economics for chlor-alkali?

That's me again. Okay. Thanks. Yes. I mean, I think as we see a high oil price, most of -- whether we look at Europe or in Asia, ethylene is naphtha-based for the most part. So we're going to see an increase or a cost push for polyethylene for PVC, for chlor-alkali products, I think, both in Europe and Asia. So as that pushes the cost push there, the challenge we have today in the industry is that our logistics systems are quite complex today and struggling to move material around the world. But I think we'll see a cost push on the other parts of the world. We've mentioned today multiple times, we have quite an advantage here on the ethane feedstock. I do think in Europe, what we're starting to see is that everyone's -- this cost push, if it looks like it's here to stay, I think the U.S. is structurally advantaged, but it is here to stay. Will the producers be able to pass that through in price increases to try to maintain those margins in Europe? I think that's the challenge everyone has today and is trying to execute today.

So I want to add that early on, we saw the chart where our debottlenecks in the PVC and the chlor-alkali side can be lower than U.S. greenfield as well as China. But that's the investment. But once you made the investment, it's all operating costs, the feedstock costs, operating cost that matters. That determines your margin. So if Europe and Asia -- don't forget, Asian has very high energy costs as well. They're a big importer of LNG. And so if their costs are higher for feedstock energy than Westlake and the rest of the U.S. chemical industry, we'll have much better position to compete around the world.

Aleksey Yefremov, KeyBanc. We've talked today about this disparity between Westlake's valuation multiple and some of the building products peers. And I would add to that maybe, some of the acquisitions that you have made were also at higher multiple than where Westlake is trading today. Is that something that kind of tempers your appetite for more acquisition in building products and especially large ones? Or is it something that you kind of see as a separate issue related to return on capital? And then if it doesn't result in rerating of Westlake, then Albert, you mentioned you'd look at other alternatives?

Maybe what I can do is take that and anybody want to add. But I would say, Aleksey, the -- as we think about some of the multiples we paid for these opportunities, the synergies that we've talked about and the operational excellence that we see to be able to run these assets really help us buy that multiple down. And so our ability to really acquire these assets and fit them in the portfolio and the way they dovetail into the portfolio that Bob has allows us, as I say, to bring some operational excellence, bringing real value to the bottom line as well as some of the synergies that we've announced in some of these transactions like Boral, bring that multiple down. So while the headline multiple may be what you think, it's actually much lower than that, and it makes it a very compelling return to us. And so from a cost of capital, risk adjusted and from a return perspective, these are compelling acquisitions as long as they bring the kind of value that we think about. So we think about the ability to continue to grow in that space. As Bob mentioned several times, there are really good opportunities in this business because there are a number of smaller players that allow him to fit into the portfolio. And Bob, you may want to speak to that?

Yes. There's -- it's a fragmented market. And in some of the pieces of the business that we compete in, they're very regional. So there's a lot of opportunity to continue to look at kind of a consolidation strategy and a buildup.

Yes. We think -- the earlier question, Q&A session, I mentioned about why we want to invest in the downstream building part of the business. Not only we mentioned about our size and able to have applied the operational excellence we have in chemical side, but also, I think Steve mentioned that building products tend to have much lower CapEx intensity than chemicals. If you want to build a chemical plant, a building here, a building there, whereas in the building product business, you can put a plant for $20 million, $30 million, $40 million, and you can have a very good position. So we have much more flexibility to do more acquisitions or building plants or expanding plants, much lower dollar. And I think what we are asking for in the end is return on our investment, and what counts for us is not just purely margin. Of course, we like to have high margin.

Dave Begleiter, Deutsche Bank. Albert, just on ethylene in China, what are you seeing in terms of what's happening on the ground over there? It looks like most crackers are running below nameplate due to weak margins given the high energy prices. And how does it influence your view of the medium- to long-term view of the global ethylene cycle, given likely structurally higher oil prices for the near term?

That's a $64 million -- thousand, million type of question. And today, with the polyethylene price, 60% of ethylene goes to polyethylene in the world, the Chinese integrated guys are losing money, losing cash. So they probably cut back or whatever. But I think in the long run, it's feedstock. Once you invest -- I know Chinese plant people say -- I shared in the past, said they can build it 50% cheaper. I don't think it's 50% cheaper, but they're using similar equipment. Labor-wise, they are cheaper, engineering costs, but not equipment cost. But once you invest it, that's it. And so as I said earlier, it's all operational costs, feedstock, operational cost that determines your margin, not what you invested. That's on costs, right? So we look very carefully on everything we do, how can we compete? Where is -- the investment is important if you want to keep on expanding it, but also operating costs, where we cut margin, SG&A. I think if you look at Westlake, if you take away our building products, our chemical SG&A is very low, among the lowest in our industry. And of course, even in the -- I mean, Bob can add on that, that even when we compare our SG&A for building products, our building products were much lower than the industry.

Yes. Most of our competition, we've got lower overhead costs.

So we know we are very competitive. We said earlier, everything we do, we watch cost. As a management, the economic value added, maybe I should explain, that determines our bonus payment, right, EVA system. You can look at our proxy, explain very detail how it works. So the economic value to earn the cost -- above the cost of capital determines our bonus and annual incentive plan, which is a big part of our incentive payment. So all our management, we have over 1,000 people now in Westlake, maybe 2,000, are under this annual incentive plan, right, with our EVA calculation. So we've been practicing it for over 30 years, and that's why we keep on talking about economic value added. It's in our DNA.

P.J. Juvekar. So I have 2 questions. The first one is, I think, for Steve or Albert. You guys didn't mention Westlake Partners. At one point, MLPs were in demand. Maybe they are not in demand anymore. Would you like to keep Westlake Partners as is? Or would you bring it back into the fold?

So P.J., we've raised about $500 million of equity capital in that space. And certainly, it's allowed us to really fund our businesses without having to tap the leverage markets. And so certainly, as that market provides capital, we'll tap that market for that. It was never intended to raise large amounts of lumpy equity capital. It was always intended to be a dribbling process of units into the marketplace. While the market has been challenged in the last couple of years, we certainly still see it as an opportunity to raise small amounts of equity capital at very advantaged multiples relative to the chemical multiple that we historically raised. And so today, as we think about the business itself and the partnership, as I say, it is challenged, but there is opportunity to raise small amounts of capital relative to the multiples we're seeing today in the material space.

So you want to keep it as is?

At this stage, it makes sense, yes.

Okay. And my second question is on composite materials for Bob. There's a big area of composite decks and companies like Trex and Trex materials. It's a big area. Is that something would you look at in the future? And then maybe, Albert, how big of an acquisition in building products would you entertain?

Okay. Well, first on composite decks, yes, it is a big and growing category. And we actually do participate in the category. If you'll see outside here in our product display, our Zuri decking material, but it's not designed to compete directly with Trex. It's a high-end deck material that actually would be substituted for exotic hardwoods like teakwood decks. So it's a high-end product. But this is a big market area. It's one that we're watching. It's one that we're paying attention to, and it could be an opportunity.

And Trex is selling, what, 40x EBITDA multiples?

Yes. It's a large multiple.

Angel Castillo with Morgan Stanley. So I recognize Europe is a small part of your business, but I just wanted to touch on a couple of things. One, Larry, I noted GreenVin, I think, has been introduced into the market. So would love to hear how that launch is going, in particular, as you think about sustainable products, maybe the pricing strategy and discretionary income for the consumer being hit. Just if you could give us more color how that's kind of progressing in terms of the launch. And then in terms of Epoxy, would love to hear a little bit more what the weakness there is. And how does the market look in terms of competitiveness now that one of your peers has actually reduced capacity in the region?

So on the EU, the GreenVin, the caustic and the PVC renewable product, is marketed in Europe. And I think, I mean, one of the things we always say is, something to really be sustainable, it needs to be economically sustainable. So that issue of economically sustainable with every product is how do you price it in the market, right? A lot of sustainable products have cost that could be greater than, say, the nonsustainable products. So we seek to recover that cost. It's -- we're at the beginning of that story with each product, right? You go out in the market, and you seek what it can be. But I wouldn't say it's give me or it's easy. You work on that just like you do any product to differentiate yourself and sell it. And I mean, the EU is clearly out ahead of North America and some of the ESG initiatives. Although our footprint is like the group, as I said, 84% in the U.S., we've got a pretty decent Europe footprint between the Vinnolit, the Epoxy and the compounding operations. So we're on the ground there, and we're working on all of those EU initiatives there where they're out ahead of the North America.

Roger will answer the...

Yes. Thanks. I'll make a -- just quick comment on Epoxy. So we're seeing on the Epoxy growth, I would say, different driver or different speeds certainly between Asia, Europe and the U.S., and the U.S. is still very, very strong. I think in Europe, with the price spikes that came and hit very quickly on the energy costs, the entire industry, no matter what product you're selling, is working right now to figure out how do you protect yourself from that and recuperate from that. And Epoxy's is no different. So with the price coming up fast in energy, the industry is trying to figure out how do we pass that on. What I would say is for us as well, if we had sites that needed any significant maintenance, we tried to do them at that point, right? It's the right moment to back off, do your maintenance you need and be prepared as the stabilization comes back. As Albert mentioned, we hope the Russia-Ukraine crisis ends quickly. We start to see some clarity there and where that's going.

Kevin McCarthy, Vertical Research. So maybe 2 final questions on Epoxy. First, you've owned the Hexion business for a little over 2 months now. Maybe you can talk generally about the integration of that business, how that's going and any synergy opportunities that you might see there. And then second, more specifically, can you address or assess the pros and cons of potentially adding epichlorohydrin capacity versus perhaps procuring more in a buy-versus-build scenario?

Okay. Sure. I think first step, as far as synergies, so we're 2 months in. And I'd say, we've been very happy so far with what we're finding in both the quality of the people, the quality of the work with the customers as we have a nice testimonial already in our video from a customer and a part out there that's quite customer intensive, I would say, to design. So we're very positive there. Certainly, there's aspects on normal areas of SG&A, procurement, those types of pieces. But we mentioned the 9 R&D centers. We now have 2 very close to each other in China. We've added another site in Germany close to our Vinnolit one. So we're starting to work now across all those specialty products to also transfer what are we doing. And we're finding interesting opportunities where even between our specialty PVC and our Epoxy business, there's customers that are using one or the other or both. And we have the ability to start to leverage those customer contacts there. I think the question on epichlorohydrin is a very good one because in Europe, we make epichlorohydrin. We self-supply that. In the U.S., there's only one supplier. And I think as we go forward, it's -- as you mentioned, it's a make-versus-buy decision. As Albert mentioned, we're EVA driven. We don't necessarily need to invest CapEx if we don't need to. But we certainly have the ability, the caustic, the chlorine, the propylene. If we need to go upstream into epichlorohydrin, we have that capability.

Just to interject, I think we have time for one last question. But after this is lunch, where we'll have Westlake representatives at every table. And so plenty of time for more discussion and Q&A with the Westlake leadership, but yes.

Charlie Rose. Just one. Can you just discuss your differentiation? Obviously, Olin and you guys have become sort of the chlor-alkali mavens. Can you talk about how you see yourselves versus them in the marketplace and how that plays out over time?

Yes. I think -- I mean, the fundamental difference is that we have PVC, right? So we have a tremendous chlorine value-added application in our own house. And so we continually, as I mentioned earlier, continue to kind of debottleneck and pull the chlorine through that chain inside our house. I think that's one of the biggest and key differences between Olin and Westlake.

Great. We'll break for lunch again. Thank you for -- from everyone here for attending today, and please don't forget to get your gift at the door as well. It is a PVC product that disappoint. It's not a large diameter pipe or a piece of siding, but we think you'll enjoy it, nonetheless. Thanks.