Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported August 4, 2026 · Beat 1 of last 7 quarters
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Westlake's Q2 results underscore the AI infrastructure buildout's contribution to demand for PVC pipe and fittings, with management citing data center construction as a key driver of the ~20% year-over-year volume growth in Pipe & Fittings. The company's exposure to data centers is indirect but growing, with distributors indicating up to 30% of pipe spend could be data-center-related, positioning Westlake as a beneficiary of continued infrastructure investment. The acquisition of the Wilhelmshaven PVC/VCM plant and the new PVCO plant in Wichita Falls further expand capacity to serve this demand.
Westlake reported Q2 2026 net sales of $3.3 billion and net income of $260 million ($2.01 per share), a substantial improvement from a net loss of $12 million in Q2 2025. PEM EBITDA surged to $416 million, up $364 million year-over-year, driven by higher average sales prices (up 14% YoY, 21% sequentially) from Middle East conflict-driven oil price spikes, lower North American natural gas and ethane costs, and the 3-pillar profitability plan. HIP EBITDA was $276 million, up $1 million year-over-year, with 8% revenue growth and 6% organic volume growth, led by Pipe & Fittings volume up ~20% YoY, though margins declined to 22% from 24% due to lower prices and cost inflation. The company retired $500 million of debt, repurchased $30 million of stock, and closed the acquisition of a PVC/VCM plant in Wilhelmshaven, Germany.
Management maintained its 2026 target of $600 million of EBITDA benefit from the 3-pillar profitability improvement plan, with $300 million already delivered in the first half. For HIP, they guided 2026 revenue and EBITDA margin to the lower end of the previously communicated ranges of $4.4–$4.6 billion and 19%–21%, respectively, citing a muted North American residential construction outlook and higher transportation and raw material costs. PEM pricing is expected to be influenced by global oil price movements, with polyethylene prices exiting Q2 slightly below the quarterly average but remaining higher than pre-conflict levels. The company plans to integrate the newly acquired Wilhelmshaven PVC/VCM plant in Germany, which is expected to contribute more meaningfully to PEM sales and earnings beginning next year. Management emphasized improving plant reliability, with operations running well into July and expectations to run assets at higher rates in H2, supported by a relatively small number of planned shutdowns. They also expect a significant release of working capital in H2, particularly in Q4, and continue to expect 2026 capital expenditures of $900 million and cash interest expense of approximately $215 million.
“During the second quarter, we delivered $3.3 billion in net sales and EBITDA of $679 million which was a substantial improvement from both the first quarter of 2026 and the second quarter of 2025.”
on Quarterly performance
“Our Epoxy business has done a complete turnaround from annual losses in excess of $100 million to a return to profitability in the second quarter of 2026.”
on 3-pillar profitability plan
“We also believe that some Pipe orders and demand may have shifted from the third quarter into the second quarter of 2026 as customers sought to secure supply in the wake of the onset of the conflict in the Middle East.”
on Pipe demand pull-forward
How much of the $150 million year-over-year benefit from the 3-pillar program was on the PEM side, and how sustainable are the higher profitability levels?
Jean-Marc Gilson said the vast majority of the benefit went to PEM, and none are one-offs—they are sustainable cost savings. Jon Baksht added that the savings are visible in the P&L, with cost of sales down $150 million in H1 despite 3% volume growth, translating to the $300 million H1 benefit.
What are your latest thoughts on the low-density and linear low-density polyethylene markets, including July settlements and price trajectory?
Jean-Marc Gilson said PE is up 25% through Q2, July has not settled, and August announcements are out at up $0.05. He expects pricing by year-end to be higher than the prior year.
How much of your production did you export in Q2 and the first half, and what are your expectations for caustic in the back half?
Jean-Marc Gilson said exports are between 10% and 20% of production, much lower than competitors, so less exposed to export pricing. For caustic, he expects solid demand and flat pricing, with the second half averaging higher than the first half.