Earnings Call: Q2 2021

Aug 3, 2021

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Corporation Second Quarter 2021 Earnings Conference Call. During this presentation, all participants will be in a listen only mode. After the speakers' remarks, you will be invited As a reminder, ladies and gentlemen, this conference is being recorded today, August 3, 2021. I would now like to turn the call over to today's host, Jeff Holly, Westlake's Vice President and Treasurer. Sir, you may begin. Thank you, Julia. Good morning, everyone, Welcome to the Westlake Chemical Corporation Second Quarter 2021 Conference Call. I'm joined today by Albert Chao, Our President and CEO Steve Bender, our Executive Vice President and Chief Financial Officer and other members of our management team. The conference call agenda will begin with Albert, who will open with a few comments regarding Westlake's performance and the current perspective on the industry. Steve will then provide a more detailed look at our financial and operating results. Finally, Albert will add a few concluding comments, And we will then open the call up to questions. During this call, we refer to ourselves as Westlake Chemical. Any reference to Westlake Partners is to the Master Limited Partnership, Westlake Chemical Partners LP and similar references to OpCo, Refer to our subsidiary, Westside Chemical OpCo LP, which owns certain olefins facilities. Today, management is going to discuss certain topics that will contain forward looking information that is based on management's beliefs as well as 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. Actual results could differ materially based upon many factors, including The cyclical nature of the industries in which we compete availability, cost and volatility of raw materials, energy and utilities Governmental regulatory actions, changes in trade policy and political unrest, global economic conditions, including the impact of the coronavirus, Industry production capacity and operating rates, impacts of extreme weather events, the conditions to the closing of Burrell, Lasko and Dymex acquisitions may not be satisfied or the closing of either acquisitions otherwise may not occur. The supply demand balance for Westlake's products, competitive products and pricing pressures, access to capital markets, Technological developments and other risk factors as discussed in our SEC filings. This morning, Westlake issued a press release with details of our Q2 results. This document is available in the press release section of our webpage at wesley.com. We have also posted a presentation on our website to review the 2nd quarter results. A replay of today's call will be available beginning today, 2 hours following the conclusion of this call. This replay may be accessed by dialing the following numbers: domestic callers should dial 855 859-two thousand and fifty six. International callers may access the replay at 404537 3,406. The access code for both numbers is 4,594,733. Please note that information reported on this call speaks only as of today, August 3, 2021, And therefore, you're advised that time sensitive information may no longer be accurate as of the time of any replay. I would finally advise you that this conference call is being broadcast live through an Internet webcast system that can be accessed on our webpage at westlake.com. Now, I would like to turn the call over to Albert Chao. Albert? Thank you, Jeff. Good morning, everyone. We Appreciate you joining us to discuss our record Q2 2021 results. In this morning's press release, We reported record net income excluding prior one time tax benefits for the Q2 of 2021 of $522,000,000 or $4.04 per share, as well as quarterly records For net sales, operating income and EBITDA, net income for the quarter increased $507,000,000 from the Q2 of 2020, demonstrating the strength of our business and the Economic recovery and expansion from the impacts of the pandemic. Before we delve into our record results, I just wanted to make some brief comments on our recent acquisitions. Westlake's leading positions in PVC Siding, Treatment Molding, Compounds, Pipe and Fittings provide our residential and commercial customers with a comprehensive building products portfolio of PBC Products and Solutions. We have recently announced 2 acquisitions in the building and construction materials space that will provide exciting new platforms of growth and development for Westlake. In June, we announced we will be acquiring Borrro North America's Building Products business. This acquisition will place Westlake into leading positions in concrete and clay roofing, Premium PVC Siding, trim and shutters, decorative stone and PVC windows, creating new strategic product platforms complementary to our existing building products business. These products improve the energy efficiency, durability And value in residential housings, schools, hospitals and other buildings, while enhancing the everyday lives of Additionally, we announced in July that we will acquire LESCO Fittings, A leading manufacturer of injection molded PVC pipe fittings. The addition of LESCO will further expand our PVC fittings Offering footprint into additional markets serving the plumbing, pool and spa, industrial, Irrigation and Retail Markets in North America. This product mix is also complementary to our existing product portfolio of PVC pipe Yesterday, we announced plans to acquire Diamax LLC, We are the largest processors of recycled plastic material in the United States. Dimex is a producer of a variety of consumer products Made from processed post industrial recycled PVC, polyethylene and thermoplastic elastomer and sell these consumer products to national retailers for home and commercial uses. We anticipate closing these Transactions in the second quarter in the second half of this year, we look forward to welcoming Borrow, Lascaux and Dynex employees to the Westlake family. Now turning to our Q2 results. Our earnings for the Q2 of 2021 Reflect the robust demand for most of our products and strong pricing environment. The strength in global demand in PVC and polyethylene Resulting from the growth in building and construction and the strength in consumer packaged goods drove price increases and margin expansions Across both of our business segments, the 23% year over year increase in U. S. Housing permits Demonstrated the strength in residential construction activity that is driving U. S. Demand for PVC, benefiting both our Rhinos and Downstream Building Products Businesses. The demographics of the U. S. Population in peak household formation ages Paired with the lack of a housing start over the last 10 years and limited global PVC capacity additions Created secular and structural strength in demand for PVC and Building and Construction Materials. In our Olefins segment, Westlake experienced strong margins as the polyethylene industry experienced strong Ongoing global consumer packaging product demand and tight inventory conditions due to lingering effects of the severe winter storm in February. Westlake has made significant progress in our strategic growth plans this year. And with the tight supply demand picture, We believe our businesses are very well positioned going forward. I would now like to turn our call over to Steve to provide more detail on our financial and operating results for the Q2. Thank you, Albert, and good morning, everyone. I will start with discussing our consolidated financial results and then we'll go into a more detailed review of our Vinyl and Olefins segment results. In the Q2, Westlake benefited from the continuing global economic expansion resulting in healthy demand for a majority of our products. We reported net income of $522,000,000 which excluded the one time tax benefit of $591,000,000 in the Q4 2017 is a quarterly record for Westlake. In addition, we reported record income from operations of $720,000,000 and record EBITDA of $932,000,000 for the Q2 of 2021. The $507,000,000 increase in year over year net income is a result of Significantly higher sales prices and margins for PVC resin and polyethylene as well as strong earnings in our Building and Construction Materials Business. 2nd quarter 2021 net income increased by $280,000,000 from 1st quarter 2021 net income of $242,000,000 The increased net income was largely attributable to the higher sales prices and margins strong demand in construction and building materials as well as consumer packaged goods. Our building and construction materials business also Continue to experience strong results as North American housing demand remained robust. For the 1st 6 months of 2021, net income was $764,000,000 or $5.91 per share, an increase of $604,000,000 from the 1st 6 months of 2020. The increase in net income was attributable to higher global sales prices for our major products, driven by a rebound in demand for our product offerings. 1st 6 months of 2021 did reflect approximately $120,000,000 impact caused by winter storm Yuri, But continued strong demand drove higher product margins for PVC resin and polyethylene as a result of higher prices. Our utilization of the FIFO method accounting resulted in less than $1,000,000 difference compared to what earnings would have been if we reported on the LIFO method. This is only an estimate and has not been audited. Now let's move on to discuss the performance of our 2 segments, starting with the Vinyls segment. The robust global demand for PVC was anchored by strong global construction activity. Our Building and Construction Materials business continued to benefit Robust North American Residential Construction and repair and remodeling demand. These factors drove higher PVC sales prices in the segment And we benefited from strong integrated margins during the quarter. For the Q2 of 2021, Vinyl's operating income was a record $435,000,000 increasing $415,000,000 from the prior year period as average sales price increased 54% and sales volumes increased 9%, driving higher margins for PVC resin. We also benefited in the Q2 by solid earnings driven by strong sales prices and volumes in our Building and Construction Materials business. For the Q2 of 2021, vinyl's operating income increased $235,000,000 from Q1 2021 As a result of average sales prices being up over 18%, higher sales volumes for PVC resin and strong earnings in our Building and Construction Materials driven by higher prices. In our Elephants business, robust global demand for consumer product packaging drove polyethylene prices higher in the 2nd quarter and expanded margins. Industry consultants reported polyethylene price increases in the Q2 of $0.19 per pound And average sales prices for Olefins segment were up 26% in the quarter. Olefins' 2nd quarter 20 21 operating income of $277,000,000 increased $252,000,000 from the Q2 of 2020, Driven by strong pricing and margins that were partially offset by lower sales volumes resulting from the lingering effects of Winder Storm Uri and our own planned maintenance activities. For the Q2 of 2021, Olefins operating income increased $97,000,000 from Q1 2021, primarily due to higher sales prices and margins. Next, Let's turn our attention to the balance sheet and statement of cash flows. We generated $617,000,000 in cash flows from operations in 2nd quarter of 2021, resulting in total cash and cash equivalents of $1,800,000,000 2nd quarter 20 21 capital expenditures were $129,000,000 We maintain a long dated debt maturity profile with a weighted average debt maturity of 13 years, While maintaining strong credit metrics anchoring our investment grade balance sheet. Now to address some of your modeling questions, we expect our effective tax rate For the full year of 2021 to be approximately 23% and a cash tax rate of approximately 20%. Our capital expenditures forecast for the year is expected to be between $750,000,000 $850,000,000 We are planning for a turnaround of our Petro II ethylene unit to begin in September of this year. We expect this turnaround and associated outage to last approximately 60 days. With that, I'll now turn the call back to Albert to make some closing comments. Albert? Thank you, Steve. Westlake's customer focused product portfolio is well positioned to continue to benefit On the strong demand environment we are experiencing, this quarter's results illustrate the earnings capacity of Westsay And highlights the value of our products and our high level of integration, which extends through the value chain From natural gas liquids and other feedstocks through to consumer building products. As supply chains and manufacturing fully recover To meet the globally strong demand for consumer and industrial products, Westlake is well positioned To continue to deliver strong results, we see PVC supply demand fundamentals remaining favorable With the growth in demand more than offsetting the limited global supply additions, we also believe that rebounding manufacturing activity will drive caustic supply demand fundamentals to improve. We see the global strength in construction, Especially North America residential construction and repair and remodeling activity continuing to drive demand for our Building and Construction Materials. In our Olefins business, demand remains robust as Essential everyday products such as consumer packaging and healthcare drive polyethylene volumes. The strategic acquisitions of BORO North America and Lascaux provide Westlake the springboard To significantly leverage our participation in the strong housing and repair remodeling market By adding to our current product portfolio, housing starts increased again in May and are projected to continue to rise. The secular strength in housing and repair and remodeling supported by limited supply of single family homes due to a decade of underbuilding On compelling demographics of homebuyers in the U. S. The proposed $1,000,000,000,000 infrastructure bill Would also significantly benefit our Building and Construction Materials business and drive construction demand for many years. Our ongoing growth initiatives are driving expansion of complementary products to our existing portfolio, which when coupled with strong market growth will deliver value for our shareholders. We will continue to look at opportunities that both further our strategy of adding complementary assets As well as increasing our vertical integration capabilities in all of our business segments to deliver good returns to our shareholders. We'll do this through the lens of being a good corporate citizen by applying the tenets of ESG As part of the commitment to building a more sustainable future. As discussed last quarter, A part of our green initiatives includes introduction of green caustic soda known as green bean, which has a reduced CO2 impact of more than 30% compared to conventional caustic soda. The planned acquisition of Dynex adds to our green portfolio of products and We will continue to develop products that are in line with our sustainability goals, while meeting the needs for greener products and Deliver value to our shareholders. We are dedicated to our core tenants, namely to protect the health and safety Our employees deliver on our value commitments to our customers and be an environmentally and socially responsible corporate citizen While strengthening all aspects of our company, anchored by these values, we're confident Westlake is well positioned To serve the growing worldwide needs of our customers, while maintaining financial discipline, which combined with the strong fundamentals of our business, enables us to deliver long term value to our shareholders. Thank you very much for listening to our Q2 earnings call. Now, I'll turn the call back over to Jeff. Thank you, Albert. Before we begin to take questions, I would like to remind you that a replay of this teleconference will be available 2 hours after the call has ended. We will provide that number again at the end of the call. Julia, we will now take questions. Your first question comes from the line of David Biglady. Thank you. Oliver and Steve, have your July polyethylene contract settled yet? If they did, where do they settle? Yes. We believe the July polyethylene contracts will be up $0.05 a pound. Very good. And the consultants are calling for some erosion over the next 4 to 5, 6 months here. Do you agree with that conclusion or do you think we'll see a little more stability and resiliency in polyethylene pricing? As we said, the demand for polyethylene is still very strong and some of the industry players has done further price increases in August. And we believe with a global recovery in economy, even though we know there's a delta variant that's Being quite contagious, but we believe the demand for our product is still very strong. The industry and customers' Even to raise another time, we're not back to the pre pandemic levels yet. So we believe with strong demand And there's some capacity coming up, but so near the end of the year or next year and globally. So we believe that Prices still be good. Now would it go down a bit? Probably. But the prices are very good today and industry can Your next question comes from Hassan Ahmed from Alembic Global. A question Right. So, we're talking So Certainly. Yes, as you know that Westlake is well integrated downstream to our PTC business. So we look through the value chain as well as to maximize Our optimized return to our company and to our shareholders. And we have contracts, we certainly honor our contracts. And when contracts coming due, we certainly would work with our customers, many of them are very long term customers and to get value where the market So we have a lot more avenues to integrate our chlorine This is some of our competitors with limited avenues. And as you know, the PVC margin today is very, very good. And suddenly, We're trying to maximize the PBC value chain. So absolutely, I think all the companies that everybody is doing The best for the company and also looking out interest for the long term customers. So we'll balance those two needs. Understood. And moving towards the ethylene polyethylene side of things. 1 of the largest producers of polyethylene in North America And this company's view is that 6 to 15,000,000 tons of those 31,000,000 tons may either get Certainly, there's a lot of capacity being announced, especially in Asia, especially in China, As well as some few ethylene plants that's been announced, but hasn't gotten into final Stages of building starting breaking ground yet. So we are aware of all these Projects, but we believe that time will tell Whether all these announced projects will go ahead, as we know that China, even though they are the largest Consumer market for polyethylene, there's still a net importer of polyethylene. And I think U. S. Is still net it's a large exporter of poly So what China does has a big bearing on the future supply demand dynamics for polyethylene globally. Very helpful, Albert. Thank you so much. You're very welcome. Your next question comes from the line of John McNulty from BMO Capital Markets. So, quick question on Dymax. One of the comments made in your press release was that Dymax is one of the largest process Can you provide some detail on the overall market for the cycle? How do you see it growing? And then how the margins are performing? What's the existing platform? Yes. Dymex is, as we said in the release, one of the largest players in this recycled materials business. And we see this business as a growing opportunity. You can see that they recycle and reuse and manufacture products coming from PVC, polyethylene and TPE. So we continue to see this as a growing important market, and certainly, the opportunity is there. You saw in the release that we said their business is over $100,000,000 in size, and we certainly see very good margins in that business going forward. And that's the basis behind, I think, a very good investment and we expect to see good returns in the investment in Dynex. Got it. You're cutting out. Can I get you to repeat that question? You were cutting out during This is a question around the building products platform. Are you still seeing issues around supply chain and logistics constraints in this country? And if you are, how much of the earnings potential of the platform is being subdued because of Well, I would say certainly there have been some challenges really given the logistics and supply chain. Some of these are additives And plasticizers and such, but we have multiple suppliers that allow us to be able to jockey through those kinds of challenges. Certainly, we've seen some opportunities continue to grow the business and the ability to continue to meet this growing market demand. So those challenges, while they are sometimes there, we've been able to adjust and adapt with our multi sourcing approach In meeting the needs of our customers by sourcing with alternative suppliers, if need be, for some of those additives and plasticizers. Okay. And just one final specific question. When is BBC crisis close for Yes. I think PVC was flat. Your next question comes from the line of Steve Byrne from Bank of America. So I recently complained to Jeff Holly about the cost of some PVC shitting that were in the $10 a pound range, Not the dollar or pound range on your slide 13. All I got from Jeff was a smile. But perhaps you can comment on how much of that $10 is your margin versus Home Depot or maybe more broadly, How would you characterize the margin in your Billing Products business versus the rest of the bundles? Yes. Our building product business is doing quite well, and we are passing resin price increases or cost increases Hello. Sometimes, there's a time lag, but we are, by and large, able to pass through some price increases. And Depending on the products, sometimes we expand the margin as well. And we see very strong demand for all our downstream building products For the rest of the year and somewhat into next year. And so as you build out this platform, Are you at the point where you have some negotiating leverage with the home centers and the specialty construction distributors where you can offer them the Where you can offer them a broader portion of the shelf And thus have some negotiating leverage or you're not there yet? No. You're absolutely right. Part of our Synergy is we are much more important to distributors and retailers for our products. We have more products to offer. And today, in the building products area, having supply is more important to customers. So we are almost literally hand to mouth In terms of deliveries, I think the other gentlemen talk about logistics. Sometimes it's hard to find truck drivers And some caused delivery delays. But by and large, we are getting Become more important to our customers and we like it and we like to be more important to them and they like us to we've been working with them for many, many years And they like us to become larger and more relevant to their business. So I think it's a win win for both parties. Thank you. You're welcome. Your next question comes from the line of Kevin McCarthy from Vertical Research. Good morning. With regards to your building products business, Can you speak to your medium to long term strategy? That is, how do you think this business will be different And 3 to 5 years relative to 2021. Also, can you speak to your capabilities to integrate 3 pending acquisitions? And what does your future pipeline look like? Is 3 enough for now? Or does it remain quite active? So Kevin, as we think about the Building and Construction Materials business, you can see that we continue to see a very good outlook, Both in the residential construction and certainly in some of the commercial construction opportunities. And we look forward to really participating With our distributors for the products to expand that portfolio offering that Boral and Alaska certainly bring. As you think about the 3 transactions that we've recently announced, the answer is, of course, we are very comfortable that we can integrate these businesses into the broader Westlake, and we look forward to welcoming all those employees into the family of Westlake. Certainly, there'll be a lot of activity in terms of that involvement, but you can see that there is the chemical side of the business that We'll continue to look for opportunities to invest in. We have been investing organically, as you know well, over the last couple of years with Expansions in PVC, investments in the LACC ethylene joint venture, and we'll continue to look for opportunities to invest on the chemical side as well. And so I'm very confident that the leadership team and the fellow employees will be able to well integrate these three transactions. The opportunity to grow the business is something that we've done over time, and I'm comfortable that we can continue to look for opportunities going forward. And how would you describe the future pipeline? I think the opportunity set is Out there, I think the answer always is looking for the right value set that we see. Clearly, our focus is generating a bottom line return, Risk adjusted and certainly we're very comfortable that we can find the synergies in these transactions to achieve that return and bring these values to our shareholders. So when you think of the pipeline of opportunities out there, there are a number of interesting opportunities, but it's always a function of is the value proposition to our shareholders What we believe it should be. So that's really where we get very focused to making sure the value for any opportunity is going to drive long term sustainable value Kevin, just want to add also that we are looking for more recycled plastic. You know, there are a lot of plastic waste out there in the world. And with the introduction of Dynex, we'll plan to add more Recycled plastic materials into our consumer products and also with our green bean, we'll plan to introduce more Lower carbon projects into our building products material as well. So I think the whole about next 5 years, I think The whole industry, the world is marching towards lower carbon emission products and lighter weight energy efficiency. So that's the plan we plan to move towards to. Your next question comes from the line of Mike Sison from Wells Fargo. Hey, nice quarter. Thank you. Do you think you could slow vinyl EBITDA in 2022 ex acquisitions? So, Mike, when you think of the opportunity set to do that, remember, we added significant Capacity in PVC in late 2019 and as we think about the full run rate into next year, this year, We've begun to ramp that up with sales of those incremental pounds as we started in late 2019. 2020 was a challenge as we all know with COVID. But as we think about the run rate from 'twenty one into 'twenty two, we continue to see good volume growth opportunities. We've talked about those in Geismar and those in Germany that we've expanded our vinyl footprint, but we continue to look for the completion of several Smaller debottlenecks as well in United States in the vinyl space. So, we continue to see solid demand and that allows Put those incremental pounds into the marketplace. Got it. And Do you think PVC margins could continue to improve in the second half and into 'twenty two? So we've seen significant strong demand in this marketplace. I know the consultants show some seasonal weakening Because of the seasonal demand that you see during the construction season, but as you have noted over the last couple of years, we've actually had a construction season that Well into the latter quarters of the year and well into the traditional slow season for construction activities. So as long as we see the strong demand that we currently see continuing, and we do, the issue is more of a weather driven issue than it is anything else. The market remains relatively snug from a materials perspective and inventory level. Demand remains pretty strong. And so it's really a function, does weather Cooperate with us and we can we continue to have a construction season well into the winter season as we have over the last 2 years. Yes. And IHS and industry consultant are forecasting the average price for next year 2022 PBC Higher than the average for 2021 by about $0.03 a pound. Thank you. Thank you. You're welcome. Your next question comes from the line of Frank from Fermium Research. Good morning and congrats on the revenue results. As I look at the Q2 to the Q3, could you And talk about what you anticipate the expected negative impacts are here in 3Q from turnaround dynamics and obviously Yes. Frank, it's Steve. And so we don't have any other major turnaround other than the petro turnaround occurring In the Q3. And so it's really just that adage that we expect for 60 days occurring in starting in September. And so the other units, we don't have any, what I would call, significant turnaround activity in Q3 other than starting that Turnaround in September for the Petro unit. Okay. And when is the expected closing of Laurel, Lascaux and Dynex. We expect those to close in the second half of this year. It's somewhat a function Getting HSR Hart Scott Rodino approval. It's hard to know when the government will clear those. And Our best view is in the second half of this year, but we certainly look forward to closing them as promptly as possible so that we can move forward with integrating these businesses into our own. Terrific. Thanks. Thank you. Your next question Congratulations on this acquisition. Following this and the other acquisition, Sure. So it's been quite clear for a very long time that Westlake's target For leverage is really those that are established by the agencies, S. P. Moody's and Fitch. We've seen over the years they changed their targets. So rather than being fixated on a particular number, we focus on what the Expectations are of the rating agencies to remain strongly investment grade. Today, we're BBB, flat, stable outlook or equivalent With each one of those 3 and believe our metrics are even stronger than those ratings. And so our focus is really to stay Strongly rated by all three agencies and as I just mentioned, our credit metrics are even stronger than the current rating assigned by all three agencies. From a capital allocation perspective, we focus on using that free cash flow to maintain the plants and have them run reliably consistently, looking at Taking that free cash flow and beyond that maintenance activity and if we can find projects that we believe have compelling returns, Risk adjusted above the cost of capital to deploy that that way. We'll also reward investors through distributions in the form of dividends As well as share buyback. So we certainly look for the opportunities to deploy that capital across that spectrum. And then Albert, you touched on it a bit before. But can you comment on your customer polyethylene Thank you. Yes. As I mentioned, we got inventory back to pre Yuri, it's pre winter storm February of this year, we haven't got inventory back to pre pandemic time yet. And so we believe that Both customers and produced inventories between low and medium, depending on the grades, and probably will be By the end of the year, when things get back to more normal. Your next question comes from the line of Alex, is it Yermov from KeyBanc. Thank you. Do you have a view on how much capital costs for new Polyethylene and PVC plants might be up this year. And could CapEx cost inflation So certainly, we've seen capital costs for equipment continue to rise with Some of the inflations, so certainly since that is certainly going to be a consideration. Certainly, those who are investing in new plant and equipment, Certainly watch that constantly and look at variety of sources to source major pieces of equipment. And it varies quite a bit in terms of whether we're talking Bulk materials such as pipes or whether we're talking rotating equipment. But certainly, we have seen cost creep into both of those, whether it's the bulk materials or whether it's So, higher value rotating equipment. So, certainly, they certainly have elevated in cost. And you've talked about favorable supply demand outlook for PUC. Why do you think you see export prices have fallen in recent weeks? And do you see that as temporary or As part of the new check. Yes, there has been some weakness in China with PDC. And But recently, last few weeks, we see prices start moving up on a global basis. You're welcome. Your next question comes from Mike Leithead from Barclays. Great. Thanks. Good morning, Dan. First question on natural gas. Prices have gone up pretty materially the past few months. Can you just give us a rough sensitivity of how to think about rising natural gas prices on your cost structure? Sure. So when you think about the sensitivity on natural gas, dollars 1 in MMBtu can I'll call it an EBITDA impact of $100,000,000 and that's mostly in the vinyl side of the business, but 90% of that impact is on the vinyl side of the business. But you've seen as prices have moved that given the strong demand that we've been able to move a lot of that a lot of those pricing momentum through downstream into our customer base. Got it. That's helpful. And then second, maybe just a smaller question, but the corporate and other line, I think This quarter EBIT was positive $8,000,000 or so. What drove that? Yes. There are some small transactions that occur, Whether it is some of the small hedging gains that we take as we hedge on hedge activities and such, so there is certainly some interest expense. You noticed that our cash Your next question comes from the line of Angel Castello from Morgan Stanley. Hi. Thanks for taking my question. Just to expand a little bit more on the Diamond acquisition and interest for Curious if there's any particular area within the ESP sphere that is of particular interest as you look at whether it's We're looking already above reducing greenhouse gas emissions from our plants, recycling water, reducing solid waste And through the Dynex, we're trying to able to source and recycle the Post industrial, hopefully going to post consumer material, recycled material and produced products. So I think we're different from Just recyclers who just recycle and sell the compound resin, we are making finished consumer products and really going to the circular economy And we plan to grow that business in a measured way going forward. This is just the beginning. And is it fair to assume that that's maybe going to be the bigger focus near term as you kind of integrate and complete the acquisitions between building products? Well, that's right. Certainly, as we think about the opportunity to take some of this material, this Post industrial product further downstream and certainly when you think about the integration, there is product integration today in our vinyls products and certainly this Opportunity with Dynex provides opportunities to have further integration directly or indirectly, But we also see, as you've seen us talk about our Building Materials business, really having some also sales channel integration, which is very important, as Albert noted, to have More products to our customers to be able to offer a much wider product offering is also very important to our customers as well as to Westlake. Got it. That's very helpful. And then if I could just on Olefins, you noted the 5% were found for So I there's some price increases out there for August. I was just wondering if you could contextualize that with maybe what you're seeing from a customer level. And it seems like Some of the spot availability may be improving across certain grades. So are you seeing any increased pushback from customers to Future price increases, any kind of demand destruction or just I guess whether it's Yes. We don't think maybe demand destructions. There are very little alternative materials that we use. The demand is very strong And it's kind of supply. As plants come back, there are quite a few plant problems. And as supply comes back, inventory builds, I think the price as that will be stabilized. We don't expect to grow each month forever. So we expect price stabilize And but we still believe the margin will be quite good going forward. Your next question comes from the line of Arun Viswanathan from RBC Great. Thanks for taking my question. Just I'll make this quick. So, I just Vinyls, I imagine should be up, just given assuming that there's massive supply disruptions and forced maturities that you Experience in 'twenty one, the first half and maybe some margin we're going to see as well. So, it's really the only thing that there As you said, when you think about the vinyls business, if you look at some of the consultants out there, they're still showing average prices The course of the year in 'twenty two to be higher than the average price of 'twenty one. And you're right, we've had a series of weather related outages Over the course of 'twenty late 'twenty that affected 'twenty one and then of course the freeze in early 'twenty one. And so with the run that we see in demand in vinyls and the consultants reflecting higher average prices for vinyl, We certainly see strength. And as I mentioned earlier to a question, we certainly have good volumes that will continue to be additive to our Sales volumes over the course of 'twenty two from 'twenty one. On the vinyl side of the business, certainly, we've seen continued tight Inventory situations across the chain. And certainly, while there are concerns about demand Pulling back, we've certainly continued to see currently a very strong demand picture and prices certainly as we've seen before continue to Reflect that strong demand picture. So as we look into 'twenty two, it's a little bit cloudier to be able to give you a price forecast, I can say that we continue to see a very strong picture from a demand perspective and the demand for from the consumer packaged Great. Thanks. And then, thank you for asking a quick question on Dynex And the recycled market, when you acquired Ventilid, there was some excitement around getting into medical and some other applications that maybe you're underpenetrated in. Is that part of the situation here as well? Do you see an opportunity to increase your share in some of these attractively growing markets through Dimax? Thanks. Yes, we certainly do. I think the opportunity to really take some of the post industrial materials and put it into a different Sales channel that we're not in today and will be post close is an exciting opportunity for us. It allows us really to have more Product relevant to our downstream customers are distributors. Many of these distributors are similar distributors who we're selling already building product materials to as well. So when we think about the opportunity that Dynex brings, we're excited about the ability to take this recycled material, but also add to the portfolio of products And the overall Downstream Building Products businesses. And your last question comes from the line of P. J. Juvekar from Citibank. Hi, good morning. It's Eric Petrie on for TJ. How many pounds of recycling capacity does Dynex has? And how are you looking at scaling that Yes. There's certainly, I think, an opportunity to think about replicating These production capacities in other areas as we think about scaling the business. We'll get more into the Capacity size and the opportunity set as we get closer to closing this transaction, but certainly as we think about the footprint it has currently in Ohio, There could be opportunities to expand that footprint into other areas. We'll take a look and see the products that make sense and the capital necessary to do that. But as you can imagine, that will be a combination of looking at the product set to put that recycled materials into more consumer downstream products. And of course, making sure that we have the ability to do that cost effectively for our customer downstream. Thanks. And as a follow-up question, do you expect to see a benefit in volumes for chlorinated organics in the refrigerant following the passage of the U. S. AIM Act We'll know more about it going forward. Certainly, with global warming, there's more demand for refrigerants and we are in We're materialized for the refrigerant business. So as that business grows, we should be benefiting from that as well. You have no further questions at this time. Thank you, Julia. Thank you again for participating in today's call. We hope you'll join us again for our next conference call to discuss our Q3 2021 results. Thank you for participating in today's Westlake Chemical Corporation's 2nd Quarter Earnings Conference Call. As a reminder, this call will be available for replay 2 hours after the call has ended and may be until 11:59 pm Eastern Time on Tuesday, October I'm sorry, August 10, 2021. The replay can be accessed by calling the following numbers. Domestic callers dial 855859 2056. International callers may access the replay at 404 537-3406. The access code for both the numbers is 459 for 733. Thank you. Have a great evening.