jefferies 2016 industrials · pdf file• the continuing ngl’s flowing from these...

August 10, 2016

Westlake Chemical Corporation Jefferies 2016 Industrials Conference

The Axiall Acquisition Creates A Diverse, Vertically-Integrated Chemicals Leader

2

Combination with Axiall creates a North American Olefins and Vinyls leader

− #1 North American LDPE capacity

− #2 North American PVC capacity

− #3 North American Chlor-Alkali capacity

Consistent with Westlake’s vertical integration strategy The Axiall acquisition:

− Combination expected to enhance margin stability

− Better positioned to capture value throughout the chain and earnings cycle

− Further integration into PVC building products provides additional operational certainty and growth opportunities

Diverse geographic and product positions

Expanded manufacturing presence expected to enhance future opportunities and global growth potential

Expected annual cost reduction of over $100 million as announced by Axiall on a stand alone basis

Expected annual cost synergies of an additional $100 million from the combination with Axiall

Transaction expected to be accretive in the first year following close

Source: IHS Chemical

3

Structure and Consideration

• $33.00 in cash per Axiall share

9% premium over 52-week average before January 28, 2016

18% discount to 52-week high for same period(a)

• Represents an enterprise value of approximately $3.8 billion including the assumption of certain Axiall liabilities

6.1x Axiall Cycle Average Adjusted EBITDA including expected synergies(b)(c)

Financing

• Westlake to assume approximately $1.4 billion of Axiall debt

• No financing contingency with fully committed bridge facility of approximately $1.8 billion in place

• Westlake committed to maintaining investment grade credit ratings

Conditions Expected to

Closing

• No material regulatory concerns anticipated (HSR and Canadian Antitrust approval required)

• Axiall shareholder vote required

• Transaction expected to close by Q4 2016

(a) Based on intraday high (b) Cycle Average Adjusted EBITDA of approximately $523m, estimated using average Adjusted EBITDA over 2010-2015 based on publicly available

disclosure (c) Multiple reflects $100m in anticipated annual synergies Source: Company SEC filings, FactSet

Axiall Acquisition Transaction Overview

North American Chlorovinyls Leader with Enhanced Scale

4

0

500

1,000

1,500

2,000

2,500

3,000

Shintech Combined Oxy FPC Axiall Mexichem Westlake

kMT North

American PVC

capacity

North American

Chlor-Alkali

capacity 0

1,000

2,000

3,000

4,000

5,000

6,000

Olin Oxy Combined Axiall Shintech FPC Westlake

kMT

Ethylene 3.6B lbs

Highly Integrated Chain in the U.S. Enhances Margin Stability

5

Ethylene Expansion: ~100MM lbs

Polyethylene 2.6B lbs

Styrene 570MM lbs

Chlorine 6.0B lbs

Expansion

Olefins

Vinyls

Vinyls

PVC 4.8B lbs

Building Products 1.8B lbs

All ethane feedstock capability

Chlorinated Products

Chlorinated Products 4.7B lbs

Key:

• Additional ethylene plant expansion in Calvert City in 2017 means further vinyls integration and lower costs

• Westlake, through Axiall’s Lotte JV, provides potential further ethylene integration

Additional Ethylene via JV with Lotte

~220MM to 1.1B lbs

Source: IHS Chemical, Company SEC filings, Westlake Management

Expands Global Geographic Footprint

High quality PVC resin and film products in a growth region

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The Axiall acquisition gives Westlake a global PVC presence with facilities in North America, Europe and Asia

Highly integrated, low cost production

Global leader in specialty PVC

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

24,000

26,000

28,000

30,000

1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

Capacity (MM lbs.)

Vinyls Olefins

Company Begins Operation in Lake Charles

Acquired VCM in Calvert

• Started Petro 1 • Acquired PVC • Plant

Acquired Geismar VCM/PVC Plant

Acquired 1 Pipe Plant

• Acquired 3 Pipe Plants

• Calgary Window Plant

• Start Suzhou • China Film

Plant

Increased LDPE By 500 MM/lbs

• Acquired CAO • Started Petro 2

Started Poly 3

Started Suzhou PVC Plant

Acquired NY Windows Plant

• Started Styrene • Acquired 3 Pipe Plants

IPO

• 20th Anniversary • Acquired

Longview

7

Acquired Vinnolit, Calvert City Ethylene / PVC Expansion

• Acquired Certain Teed,

• Petro 2 Ethylene & Geismar Chlor Alkali Expansion

Note: Axiall capacity includes PVC and Chlorine based on IHS Chemical North American capacity Source: IHS Chemical

• Acquiring Axiall,

• Petro 1 Ethylene Expansion

Strong Value Creation and Profitable Growth

81nidZpGqzkSDMpD

Combination Expected to Produce Robust Financial Results and Generate Strong Synergies

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Note: Combined financials exclude pro forma adjustments 1) See page 23 2) Includes only Olefins and Vinyls segment EBITDA, does not include any EBITDA at the corporate level 3) Axiall’s EBITDA has been adjusted for costs relating to: restructuring, divestitures, integration, debt refinancing , legal & settlement claims, amortization of intangible

assets, loss on sale of discontinued operations and other fees

WLK(1) AXLL Combination

Net Sales $4,236 $3,183 $7,419

Adjusted EBITDA(3) $1,095 $268 $1,363

OUR MISSION • profitable growth … • in businesses we understand… • globally in areas we can gain an edge… • in a disciplined and opportunistic manner

Olefins LTM 2Q 2016

Combination EBITDA(2) Vinyls

$745 Combined $649

53% % of Total 47%

(LTM 2Q 2016 in millions)

Pictures: Raumedic, Benecke

World Ethane

Ethane

Other NGL's

NGL Feedstock Flexibility & Infrastructure

Well positioned to take advantage of ethane and other NGL’s: • The shale oil & gas revolution has triggered an increase in infrastructure

build over the last several years • The continuing NGL’s flowing from these basins will drive further pipeline

and infrastructure expansion through 2018 and beyond. • Westlake ethylene plants are fully capable to use ethane and have some

NGL flexibility Lake Charles ethylene plants are able to access ethane in basins

and shale plays from Eagle Ford, Permian, Rockies, Marcellus and Utica

Calvert City ethylene plant is now receiving ethane from the Marcellus and Utica basins

Westlake’s European business (Vinnolit) purchases ethylene which is naphtha based and provides further feedstock diversification 9


8% 9%

70%

13%

Ethane Propane Naphtha Other

Westlake’s North American Ethylene Feedslate Capability

Western Europe Ethylene Industry Feedslate

Westlake

100% Ethane Capable

Ethane Non-Ethane Feed

World Ethylene Westlake

4.5 ¢

6.7 ¢

7.8 ¢

9.4 ¢

0

1

2

3

4

5

6

7

8

9

10

LDPE, 58%

LLDPE, 42%

Advantaged Polyethylene Product Mix

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LDPE Is More Profitable Average Margin Advantage of LDPE vs.

Other PE Grades LDPE 23%

LLDPE 31%

HDPE 46%

2015 Global Industry Demand (% share)

2015 Total Demand: 195 billion pounds Source: IHS Chemical

Westlake Capacity (% share)

Total Capacity: 2.6 billion pounds 2001 – 2015 Average 2011 – 2015 Average

LDPE

vs.

LLD

PE

LDPE

vs.

HD

PE

LDPE

vs.

HD

PE

LDPE

vs.

LLD

PE

¢


0% 20% 40% 60% 80%

Chevron Phillips

Dow

ExxonMobil

LyondellBasell

Westlake

Advantaged Product Mix Westlake’s Unique LDPE Focus

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LDPE Capacity as a Percentage of Total Company PE Capacity

Westlake has one of the highest

LDPE product mix percentages in North America

Aver

age

Annu

al L

DPE

Cap

aciti

es (M

M lb

s)

Total Annual North American LDPE Capacity by Company


Westlake is the largest producer of LDPE in the Americas

1,000

1,200

1,400

1,600

Westlake ExxonMobil Dow LyondellBasell

Industry Global Polyethylene Growth Focused on LLDPE and HDPE, not on LDPE

12

World Polyethylene Capacity Growth by Product

Westlake is focused on LDPE, a product which: • New additions intended to primarily serve Asian & European markets • Global polyethylene demand grows between 1.0x to 1.5x GDP • LDPE capacity additions are almost all tubular Sources: IHS Chemical,

OECD December 2015

43%

50%

7%

Chlor Alkali

Ethylene

PVC Resin

52%39%

9%

Chlor Alkali

Ethylene

PVC Resin

Low Cost Producer of PVC Due to High Integration Positive Industry Fundamentals

• Majority of margin captured in chlor-alkali and ethylene

• Most producers are integrated into chlor-alkali, not ethylene • In North America, only Westlake in the USA and Formosa

are integrated into both • Integration has historically allowed Westlake to operate its

chlorovinyls plants at higher operating rates than US industry average and enjoy strong margins

• Through backward integration into chlor-alkali (shale gas based power) and ethylene (shale gas based ethane), Westlake is one of the lowest cost producers globally

• Able to export cost competitive PVC, minimizing exposure to domestic housing cycle

Overview of the Vinyls Chain Typical Vinyls Industry Margin Distribution Over the Last Cycle


Polyvinyl Chloride (PVC)

Vinyl Chloride Monomer

(VCM)

Ethylene Dichloride

(EDC)

Chlorine

Ethylene

Chlor-Alkali

Caustic Soda

PVC Building

Products)

Merchant Sales

Chlorinated Products

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Vinyls Industry Margin Distribution: 2010 - 2015


Westlake is the Global Leader in Specialty PVC

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Westlake / Vinnolit is a leading specialty PVC producer

2015 Specialty PVC global capacity: ~3,700 KMT


Westlake’s acquisition of Vinnolit provides: • Specialty PVC which enhances Westlake’s product suite • Better margins and reduced volatility • Improved distributions, especially to emerging markets

0

100

200

300

400

500

600

WLK/ Vinnolit(Germany /

UK)

Mexichem(Mexico /

United States/ Germany)

Formosa(Taiwan /

United States/ China)

Inovyn(EU)

Tianjin Bohai(China)

Shenyang(China)

Kaneka(Japan)

Kem One(EU)

SCAC(China)

LG Chemical(Korea /China)

Cap

acity

(km

t)

Growing Global PVC Demand Supports Exports

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2000 – 2015 Global Demand CAGR = 4.2% 2016 – 2020 Global Demand CAGR = 3.6%

• Global growth in PVC demand has reverted to pre-recession levels • Global growth in PVC demand and advantaged feedstocks in PVC production supports

North American production • Producers with a high level of integration benefit with EBITDA margins over the cycle


0%

10%

20%

30%

40%

50%

60%

-

10,000

20,000

30,000

40,000

50,000

60,00020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Nor

th A

mer

ica

PVC

Expo

rts

(as

% o

f To

tal N

orth

Am

eric

a Pr

oduc

tion

)

Glo

bal P

VC D

eman

d(t

hous

and

Met

ric

Tons

)

Global PVC Demand N.A. PVC Exports

Financially Disciplined

• Disciplined Investment Culture • Strong Balance Sheet • Higher Margin Polyethylene and

PVC Products • C-Corp (WLK) and traditional

MLP (WLKP) provide opportunity for maximizing value

16

Strategic & Efficient Investment of Capital

17

Strategic Investment Drives Integration and Specialty Focus

• Highly Integrated Chain Enhances Profit Stability • Recent Large Capital Program Nearly Complete

Ethylene Debottlenecks: 2013, 2014, 2016, 2017

New Geismar Chlor Alkali Facility 2013

Ethane Feedstock Conversion 2014

Recent Strategic Investment and Capital Projects Totaling Approximately $6.0 Billion

PVC Expansion 2014

Acquired PVC Specialty Products Business 2013 Acquired Vinnolit – Specialty PVC 2014

Vinyls Olefins

Axiall Acquisition 2016*

*date based on expected close

Higher Cycle Average Margins Focus on “Bottom Line”

18

Higher margins and returns attributable to: - Focused Growth - Chain Integration - Asset Quality - Product Mix - Operating Rate Advantage - Feedstock

2005 – 2015

Source: Bloomberg *Peer average includes: EMN,

AXLL, HUN, OLN, LYB, DOW

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

Return on Assets Return on Capital Employed EBITDA Margin

Westlake Peer Average*

Strong Financial Profile

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• Strong financial profile and significant cash generation from combined company with the benefit of synergies

• Westlake committed to investment grade credit ratings and continued conservative financial policy

• Axiall transaction also supported by Westlake’s large cash balance position and unlevered balance sheet

• Axiall transaction expected to be accretive in the first year following close

Strategic Investment Drives EBITDA Growth

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2013 $1,118M EBITDA

Future EBITDA

• Timely investments to integrate the full value chain drive EBITDA • PVC acquisitions provides profitable growth

2013 Added Ethylene Capacity

2013 Added Chlor-Alkali Capacity & Acquired Specialty PVC Products

2014 Added PVC Capacity


2014 Added Vinnolit Specialty PVC Business


Vinyls Olefins

2016 Acquiring Axiall

2017 Adding Ethylene Capacity

Westlake Chemical Corporation NYSE: WLK

Public Shareholders

Westlake Chemical Partners LP

NYSE: WLKP

WLK Assets

Map of OpCo Operations

• Lake Charles Complex (PE, Styrene)

• Calvert City Complex (Chlor-Alkali, PVC)

• Longview Complex (PE) • Geismar Facility (Chlor-Alkali, PVC) • Building Products Plants (PVC) • Vinnolit Holdings (Chlor-Alkali,

PVC) 21

Traditional MLP C-Corp

Wholly Owned Subsidiaries

Public Unit Holders

OpCo Assets

• Lake Charles Petro 1 & 2 • Calvert City Olefins • Longview Pipeline

48% Interest 86.7% Interest

Four levers of distributable cash flow growth for WLKP

• Organic growth opportunities • Periodic drop downs • Acquisition opportunities, either as WLKP or jointly with

WLK • Extend ethylene contract and negotiate higher ethylene

margins

Westlake Chemical OpCo LP

100% Interest

13.3% Interest

Westlake Partners Is Growing Distributions Through Organic Growth To Fuel Low Double Digit Growth Contract structure with Westlake Chemical provides Westlake Partners with the means to make consistent growth in distributions since IPO.

22

Appendix

Reconciliation of Westlake EBITDA to Net Income (Loss) and to Cash Flow from Operating Activities (in $ thousands)

23

Note 1 from page 8: Non-GAAP Financial Measures This presentation includes the non-GAAP measure EBITDA. A reconciliation to net income and to cash flow from operating activities is included above.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 LTM 2Q 2016

Adjusted EBITDA 411,183$ 280,893$ 87,861$ 236,909$ 511,567$ 583,821$ 779,841$ 1,118,062$ 1,329,756$ 1,243,854$ 1,095,069$ Debt Retirement Cost (25,853) - - - - - (7,082) - - - -

EBITDA 385,330 280,893 87,861 236,909 511,567 583,821 772,759 1,118,062 1,329,756 1,243,854 1,095,069

Less:Income Tax (Provision) Benefit (87,990) (44,228) 28,479 (25,758) (121,567) (142,466) (199,614) (331,747) (398,902) (298,396) (257,489) Interest Expense (16,519) (18,422) (33,957) (34,957) (39,875) (50,992) (43,049) (18,082) (37,352) (34,656) (28,708) Depreciation & Amortization (86,262) (103,514) (111,926) (123,199) (128,732) (131,397) (144,542) (157,808) (208,486) (245,757) (259,739)

Non Controlling Interest - - - - - - - - (6,493) (19,035) (20,308)

Net Income (Loss) 194,559 114,729 (29,543) 52,995 221,393 258,966 385,555 610,425 678,524 646,010 528,825

Non Controlling Interest - - - - - - - - 6,493 19,035 20,308 Changes in operating assets & liabilities 28,773 (57,849) 229,511 151,320 47,412 85,855 232,707 48,572 288,392 374,007 324,554 Deferred income taxes 13,852 5,286 (13,879) 31,207 14,153 14,114 5,793 93,732 58,967 39,784 139,686

Cash flow from operating activities 237,184 62,166 186,089 235,522 282,958 358,935 624,054 752,729 1,032,376 1,078,836 1,013,373

Olefins EBITDA 212,605 220,666 38,090 260,493 546,553 548,994 654,568 943,597 1,126,172 862,777 745,064 Vinyls EBITDA 192,526 65,644 51,540 (17,124) (19,968) 48,083 130,977 207,197 247,086 397,537 381,211 Corporate EBITDA (19,801) (5,417) (1,769) (6,460) (15,018) (13,256) (12,786) (32,732) (43,502) (16,460) (31,206) Westlake Adjusted EBITDA 385,330 280,893 87,861 236,909 511,567 583,821 772,759 1,118,062 1,329,756 1,243,854 1,095,069

Forward Looking Statements Part 1 This communication contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding Westlake Chemical Corporation’s (“Westlake”) proposed transaction to acquire Axiall Corporation (“Axiall”) (including financing of the proposed transaction and the benefits, results, effects and timing thereof), statements regarding Westlake’s (and Westlake’s and Axiall’s combined) expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, estimated synergies from the proposed transaction and statements containing the use of forward looking words, such as “may,” “will,” “could,” “would,” “should,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “potential,” “plan,” “forecast,” “approximate,” “intend,” “upside,” and the like, or the use of future tense. Statements contained herein concerning the business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or other financial items, and product or services line growth of Westlake (and the combined businesses of Westlake and Axiall), together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting the best judgment of Westlake based upon currently available information. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Such forward-looking statements are inherently uncertain, and stockholders and other potential investors must recognize that actual results may differ materially from Westlake’s expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which Westlake is unable to predict or control, that may cause Westlake’s actual results, performance or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. These statements involve risks, uncertainties and other factors discussed below and detailed from time to time in Westlake’s filings with the U.S. Securities and Exchange Commission (the “SEC”).

(continued on page 25)

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Forward Looking Statements Part 2 (continued from page 24)

Risks and uncertainties related to the proposed business combination transaction include, but are not limited to: (i) the ultimate outcome of the proposed transaction between Westlake and Axiall, (ii) the ultimate outcome and results of integrating the operations of Westlake and Axiall if a transaction is consummated, (iii) the ability to obtain regulatory approvals and meet other closing conditions to the proposed transaction, including any necessary stockholder approvals, (iv) potential adverse reactions or changes to business relationships resulting from the announcement, pendency or completion of the proposed transaction, (v) competitive responses to the announcement or completion of the proposed transaction, costs and difficulties related to the integration of Axiall’s businesses and operations with Westlake’s businesses and operations, (vi) the inability to obtain, or delays in obtaining, cost savings and synergies from the proposed transaction, (vii) uncertainties as to whether the completion of the proposed transaction will have the accretive effect on Westlake’s earnings or cash flows that are expected, (viii) unexpected costs, liabilities, charges or expenses resulting from the proposed transaction, (ix) litigation relating to the proposed transaction, (x) the inability to retain key personnel, (xi) potential adverse effects on Westlake’s ability to operate Westlake’s business due to the increase in Westlake’s overall debt level contemplated by the proposed transaction, (xii) potential diminished productivity due to the impact of the potential transaction on Westlake’s and/or Axiall’s current and prospective employees, key management, customers, suppliers and business partner and (xiii) any changes in general economic and/or industry-specific conditions. In addition to the factors set forth above, other factors that may affect Westlake’s plans, results or stock price are set forth in Westlake’s Annual Report on Form 10-K and reports on Forms 10-Q and 8-K. Many of these factors are beyond Westlake’s control. Westlake cautions investors that any forward looking statements made by Westlake are not guarantees of future performance. Except as may be required by law, Westlake does not intend, and undertakes no obligation, to publish revised forward looking statements to reflect events or circumstances after the date of this communication or to reflect the occurrence of unanticipated events

25

Investor Relations Contact Steve Bender

Sr. Vice President & Chief Financial Officer Westlake Chemical Corporation

2801 Post Oak Boulevard, Suite 600 Houston, Texas 77056

713-960-9111

jefferies 2016 industrials · pdf file• the continuing ngl’s flowing from these...

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