Earnings Call: Q2 2018

Aug 2, 2018

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Chemical Corporation Second Quarter 2018 Earnings Conference Call. During the presentation, all participants will be in a listen only As a reminder, ladies and gentlemen, this conference is being recorded today, August 2, 2018. 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, Sandra. Good morning, everyone, and welcome to the Westlake Chemical Corporation Second Quarter 2018 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 followed by a current perspective on the industry Steve will then provide a more detailed look at and we will then open the call up to questions. During this call, we refer to ourselves as Westlake or Westlake Chemical. Any reference to partners or the partnership is to our master limited partnership Westlake Chemical Partners LP and references to OpCo refer to our subsidiary Westlake Chemical OpCo LP who 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 chemical industry, availability, cost and volatility of raw materials Energy And Utilities governmental regulatory actions, changes in trade policy and political unrest, Global economic conditions, industry operating rates, the supplydemand balance for Westlake's products, competitive products and pricing pressures, access to capital markets, technological developments, and other risk factors as described in our SEC filings. This morning, Westlake issued a press release with details of our second quarter results. This document is available in the press release section of our webpage at westlake.com. A replay of today's call will be available beginning today at 2 pm Eastern Time until 11:59 pm Eastern Time and August 9, 2018. The replay may be accessed by dialing the following numbers. Domestic callers should dial 8558592056. International callers may access the replay at 404537 3406. The access code for both numbers is 2 265449 Please note that information reported on this call speaks only as of today, August 2, 2018 and therefore, you are advised that time sensitive information may no longer be accurate at 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, ladies and gentlemen. And thank you for joining us to discuss our second quarter 2018 results. In this morning's press release, We reported quarterly net income to Westlake of $278,000,000 for the second quarter of 2018, or $2.12 per diluted share. 2nd quarter 2018 income from operation was a record $404,000,000 and quarterly EBITDA was $568,000,000. Strong industrial activity and economic growth continue to drive strong demand for all of our major products including polyethylene caustic soda and PVC. Our olefins segment continue to see tight supply for some grades of polyethylene and good demand for our products in both the domestic and export markets. Our vinyl segment benefiting from continued strong demand for caustic soda and our PVC products. Reduced purchased ethylene cost with the startup of a number of ethylene facility in the U. S. Gulf Coast and additional seasonal demand related to construction and water treatment Earlier this week, we announced the reset of the distribution targets that determined the incentive distribution rights or IDRs of our master limited partnership, Western Chemical Partners. We believe this reset will strengthen the ability of the partnership to raise capital at attractive levels and support dropdown transactions at attractive and accretive valuations to Westlake. The ability of the partnership to provide cost advantage equity to Westlake over long periods of time supports Westlake strategy as we continue to grow our business. While Westlake did not receive any consideration for the reset, due to the unique structure between Westlake and partners. Westlake will continue to receive the same cash flows that it would have received through the IDRs. We These distributions will just be through Westlake's ownership of OpCo rather than through the MLP. I would now like to turn our call over to Steve to provide more detail on the financial and operating results. Thank you, Albert, and good morning, everyone. I will start with discussing our consolidated financial results followed by a detailed review of our Olefins and Vinyls segment results. Let me begin with our consolidated results. This morning, we reported net income attributable to Westlake of $278,000,000 or $2.12 per diluted share for the second quarter of 2018 on record net sales of $2,200,000,000. Westlake's second quarter 2018 net income increased $125,000,000 compared to the second quarter 2017 net income of 100 and $3,000,000 or $1.17 per share on sales of $2,000,000,000. Record operating income of $404,000,000 for the second quarter 2018 increased $140,000,000 from second quarter 2017 operating income of $264,000,000 compared to the prior year period, 2nd quarter of 2018 benefited from higher prices for our major products including polyethylene caustic soda and PVC resins higher sales volume of polyethylene caustic soda and PVC resin, improved operating rates in our vinyls segment due to fewer planned Partially offsetting these benefits were impacts resulting from lost styrene sales volumes due to a planned turnaround that was completed in May 2018 and increased ethane feedstock cost. The second quarter of 2018 was also negatively impacted by $9,000,000 associated with increased reserves related to pre acquisition periods at both Axial and our European vinyls business integration cost of $8,000,000 and a one time tax charge of $6,000,000 driven by changes in state and foreign tax rates. The after tax impact of these three items Our utilization of the FIFO method of accounting resulted in an unfavorable pretax impact of approximately $12,000,000 or $0.07 per share in the 2nd quarter compared to what earnings would have been reported on the LIFO method. This calculation is only an estimate and has not been audited. 2nd quarter 2018 net income to Westlake of $278,000,000 decreased $9,000,000 from the first quarter 2018. This decreased net income from the prior quarter is due to the higher reserves I just mentioned and the higher effective tax rate driven by state and foreign tax rate changes. Impacting just this quarter partially offset by lower interest expense resulting from the retirement of $1,200,000,000 in debt during the 1st 6 months of 2018. Record income from operations of $404,000,000 was $3,000,000 higher than first quarter 2018 operating income of $401,000,000. Compared to prior quarter, the second quarter 2018 saw higher sales prices and volumes for North American PVC resin and downstream vinyls products, higher sales prices for caustic soda, higher sales volume for polyethylene and lower purchased ethylene cost. Offsetting these increases were higher ethane feedstock costs and higher impacts from planned turnarounds in both our olefins and vinyl segments. For the 1st 6 months of 2018, net income to Westlake of $565,000,000 or $4.31 per share increased $274,000,000 from net income to Westlake of $291,000,000 or $2.23 per share for the 1st 6 months of 2017. Operating income of $805,000,000 for the 1st 6 months of 2018 increased 307,000,000 from operating income of $498,000,000 for the 1st 6 months of 2017. Compared to the prior year, the 1st 6 months of 2018 benefited from higher sales prices for our major products. Higher operating rates and lower cost in our vinyl segment resulting from fewer planned turnarounds and unplanned outages. Lower purchased ethylene costs and a lower effective tax rate. These benefits were partially offset by lower styrene and polyethylene sales volumes due to planned turnarounds in our olefins segment and higher ethane feedstock cost. Now let's move on to review the performance of our two segments starting with the olefins segment. In the first quarter of 2018, Olefins segment reported operating income of $158,000,000, an increase of $15,000,000 from second quarter 2017 operating income of $143,000,000. This increase in operating income was due to higher sales prices for our products and higher polyethylene sales volumes partially offset by higher ethane feedstock cost and impacts from planned turnaround of our styrene unit. Second quarter 2018 operating income of $158,000,000 decreased $5,000,000 compared to 1st quarter 20 18 operating income of $163,000,000. This decrease in operating income was primarily due to the impacts from turnaround activities higher ethane feedstock cost and lower polyethylene sales partially offset by higher polyethylene sales bought sales prices, sales volumes. For the 1st $23,000,000 for the 1st 6 months of 2017. 1st 6 months 2018 experienced lower sales volumes due to increased turnaround activity and higher ethane feedstock costs which were largely offset by higher sales prices for major products. Now let's move on to the vinyls segment. 2nd quarter 2018 vinyls operating income of $271,000,000 increased $130,000,000 from 2nd quarter 2017 operating income $141,000,000. The increase in operating income in the second quarter 2018 is primarily due to higher margins that resulted from higher sales prices for our major products including caustic soda PVC resin and downstream vinyl products and higher operating rates and sales volumes due to fewer planned turnarounds and unplanned additives. When compared to the second quarter of 2017. While we benefited from purchases of lower priced ethylene in the second quarter not all of our purchases are at spot prices. 2nd quarter 2018 operating income of $271,000,000 for the vinyl segment increased $5,000,000 from first quarter 2018 operating income of $266,000,000. Compared to the first quarter of 2018, the second quarter continued to benefit from higher sales prices for caustic soda PBC resin and downstream vinyl products, higher sales volumes for North American PVC resin and downstream vinyl products and lower purchased ethylene costs. These benefits were partially offset by increased impacts of planned turnarounds compared to the first quarter. For the 1st 6 months of 2018, vinyls operating income of $537,000,000 increased by 3 20 $1,000,000 compared to the 1st 6 months of 20 seventeen's operating income of $211,000,000. The increase in was primarily due to higher sales prices and volumes for all of our major products, improved operating rates and lower cost resulting from fewer planned turnarounds and unplanned outages and lower purchased ethylene cost. The 1st 6 months 2017 were negatively impacted by the turnarounds and expansion of APCO's Calvert City ethylene unit as well as a number of other planned turnarounds and unplanned outages as we invested to improve the operations and reliability of the Axial facilities acquired in the second half of twenty 18. We are benefiting from these reliability investments through higher operating rates through outer vinyls chain, especially during this period of increased margins. We are also benefiting from increased synergies from our Axial acquisition as compared to the prior throughout this year. Now let's continue our discussion of the balance sheet and statement of cash flows. Second quarter 2018 cash flows from operating activities were $324,000,000 and we invested years. For the 1st 6 months of 2018, cash flow from operations was $549,000,000 and capital expenditures were $312,000,000. Looking ahead to the rest of the year, we expect full year 2018 capital expenditures to be between $600,000,000 $650,000,000, which includes our normal maintenance capital expenditures, our portion of the construction of the ethylene cracker being built jointly with Lotte Chemical in Lake Charles, Louisiana and the acquiring the long lead equipment for our chlorine, BCM and PVC expansions in Geismarck, Louisiana and Berghausen and Gandorf, Germany. That we announced earlier this we expect our effective tax for 2018 to be 16%, in line with the guidance previously provided. As of June 30, 2018, we had cash and cash equivalents of $482,000,000 and total debt of $2,700,000,000. During the 1st 6 months of 2018, we repaid $1,200,000,000 in debt and since our acquisition of Axial in August 2016, we have repaid $1,700,000,000 of debt and meaningfully improved our credit profile. With that, I will now turn the call back over to Albert to make some closing comments. Albert? Thank you, Steve. This quarter's results demonstrate the value of our investments in the operational reliability of our facilities. While we continue to experience strong global demand for all our major products. Looking forward, We believe the increased industrial and economic activities will drive strong demand for our products. As a result of expanded shale oil and gas drilling activity, driven by higher oil prices, we expect to continue to benefit from globally competitive ethane and natural gas in our olefins segment. While our vinyl segment will be driven by strong global demand for PVC resin and caustic soda and lower purchased ethylene costs with limited global vinyls capacity additions on the horizon. We remain focused on pursuing growth initiatives such as our joint venture ethylene facility with Lotte in Lake Charles, which has a planned startup in the first half of twenty nineteen. The GBP 750,000,000 of PV expansions in Geismar and Berthausen, the GBP 200,000,000 VCM expansions in Geismar and Gamedof, and have positioned our master limited partnership to continue to be an important element to fund our future growth. We'll continue to explore additional debottleneck opportunities and search for other growth initiatives that will deliver value to our shareholders. Thank you very much for listening to our earnings call this morning. Now, I'll turn the call back over to Jeff. Thank you, Albert. Before we begin taking questions, I would like to remind you that a replay of this teleconference will be available starting today at 2 pm Eastern Time. Sandra, we will now Also, to prevent any background noise, And our first question comes from the line of Steven Byrne with Bank of America Merrill Lynch. Your line is now open. Yes, thank you. I hope you can hear me. You're coming across very, very choppy to me. So let me know if you hear me, but I wanted to ask you how attractive you see the returns on potential debottleneck that you have in your downstream either Olefins or vinyls business in Lake Charles? And could you see that as being pulled forward if you were to take advantage of an earlier opt in on the low take cracker? Certainly, we are we have been and we'll continue to looking at debottleneck opportunities both in our vinyls and olefins segments. The ethylene joint venture with Lotte, as we said earlier, expected to start up in the first half of twenty nineteen. Where we'll evaluate the situation at a time. Operator, are you still with us? Yes, I'm here. And our next question comes from the line of Neil Kumar with Morgan Stanley. Your line is now open. Hi, thanks for taking my question. It looks like EBITDA margins and vinyls was down 100 basis points sequentially, despite price improvements. Can you give us some color on the drivers of that and was that due to outages and vinyls in the quarter that led to higher costs? I'm sorry, you are cutting out the line quality isn't as good as it was as I wished it were. Can you repeat your question? Sure. It looks like EBITDA margins in vinyls was down 100 basis points sequentially, despite pricing improvements. Can you give us some color on the drivers of that? Was that due to outages and vinyls in the quarter to let the higher costs? Certainly, we're going to have certainly normal planned activity, maintenance activity throughout the quarter and certainly that speaks to that. But I think you can see that our operating rates were meaningfully approved year over year quarter over quarter. So, I think, again, we continue to see a strong operating environment and but we are going to have normal maintenance expenses throughout the quarter. Okay. And then we've seen some softening in Asia caustic prices recently. It seems that some suppliers have begun to produce operating rates in response to the lower prices. What was your assessment of the situation there? And do you expect prices to rebound? Yeah. In fact, we're continuing to see a quite a strong market and as you may have seen from a number of research articles. I think we do see some of that weakness, but I think that weakness is transitionatory. We continue to see a very firm market demand drivers that we see remain to be firm. And so I think this is just a transient. At today's Asia spot caustic prices. It's about breakeven value for ECUs in Asia. So we don't believe there'll be much downside. On the other side, because of the lower caustic prices, it supports the higher PVC prices in Asia and the rest of the world. So we are seeing some PVC spot price moving up in Asia as a result. Great, thanks. You're welcome. And our next question comes from the Hi, good morning. This is Eric Petrie on for P. J. Good morning. In the Vinyls segment, could you just discuss your comment that you saw lower sales volumes in Europe as well as give us any kind of qualification for the amount of costs related to turnarounds and on planned outages? The volumes we were strong throughout Europe. And so if you misheard me or if I misspoke volumes were actually strong throughout Europe during the quarter and we continue to see that strength in the early stages of this quarter. On a quarter over quarter basis or year over year? Both year over year and quarter over quarter. It's certainly quarter over quarter because we have the seasonal upswing which we normally see in the second quarter over 1st quarter. But year over year, we've also seen strength in the economy and strong demand drivers accordingly. Okay, thanks. And Secondly, I wanted to ask about your outlook on caustic soda and pricing, a competitor is looking at saying that pricing into second half will increase. Do you agree with that deal? Well, the caustic soda prices has somewhat remained flat after the price increases announced in the first quarter of this year. And we will see whether the overseas market have any impact so far, it has not impacted the U. S. Domestic market or regional markets in Europe or in Asia. It's a spot market, which is a small part of the caustic sales has been impacted by the lower price in Asia. And our next question comes from the line of Jim Sheehan with SunTrust. Your line is now open. Good morning. So on the caustic soda spot price situation in Asia, do you think that that market the spot market in Asia provides any meaningful insight into the global supply demand balance? As we said earlier that, we believe the spot price in Asia has reached the bottom in terms of ECU breakeven for Asian producers. And depending on the supplydemand situation, economic activities, we are seeing some slower growth in Asia in China, especially. And I think the Chinese government has is implementing both fiscal monetary policies to stimulate the Chinese economic growth. So we'll see in the next few months what these these stimulus will impact the Chinese economy. Thank you. And on olefins, you're reporting a 4.4% year over year volume decline. Was most of that due to the turnarounds, or could you explain what drove that, whether it was polyethylene or some other products? It looks like one of your competitors this morning reported double digit growth in polyethylene. Yes, Jim, that was entirely driven by the planned turnaround in our Styrene unit and nothing more than that. Thank you. You're welcome. Thank you. And our next question comes from the line of John Roberts with UBS. Your line is now open. Thank you. Albert, do you have any thoughts on tariffs, particularly as it relates to the vinyls markets? This is so much Global trade in vinyls? Sure. We do not export much to to China, which is a terrorist right now with the U. S. Because the antidumping duty that Chinese have U. S. Produced PVC. So right now we don't see much impact at all. But I think the tariff dispute between the U. S. And China covers a much more broader range of products. So we'll see in the next few months how that negotiations are going on. We hope it will not have a material impact on the Global Petrochemical Business. Okay. And then maybe Steve, just a modeling question. When you start booking equity income on Lotte, does that go in the olefins or the vinyl segment? And maybe related to that, does the cost of ethylene varies significantly quarter to quarter between the two segments? And so it'll John, it'll go into our vinyl segment? And your second question was The cost of ethylene between the two segments, does it ever vary by, say, more than a nickel of pound between the two segments? Terms of what your actual realized costs is the ethylene plant in Calvert City and embedded in our olefins group, the 2 crackers we have in Lake Charles. And so they both have the benefit of producer economics Once the Botte cracker is up and running that vinyl segment will participate with the benefit of having that currently 10% ownership of producer economics. And then we'll buy the remaining portion as you may recall. We're contracted to buy additional ethylene at market prices. Got it. Thank you. From what? Yes. Thank you. And our next question comes from the line of Don Carson with Susquehanna. Your line is now If your line is on mute, please unmute it. Thank you. And our next question comes from the line of David Vitleiter with Deutsche Bank. Your line is now open. Hi, this is David Huang here for David. I guess, Albert, what's your view on ethylene chain margin in the second half of twenty eighteen and early next year, given higher ethane prices, more supply coming online and seasonally lower demand? Yes. We believe the ethane higher prices was caused by various factors. Suddenly, the Mariner East issue that did not have ethane going export from the Bacellas area has pushed more demand from the Gulf Coast. And it has come on stream now. So, normally, also some of the pipeline issues facing the bottlenecks between Permian Basin area, high production for ethane and gas liquids. But the forecast by IHS and other industry consultants are seeing that ethane ability will improve later part of this year and the forward price future price ethane is coming down into the 20s by the end of the year or early next year. So we see that pressure should moderate supply chain margin olefins is just from ethane to polyethylene. I think so long the global economic demand is still strong and oil price stays strong, polyethylene prices will stay high around the world, which will support the PE price spite that new expansions we're seeing are polyethylene capacities coming online in the U. S. So I think it's it's economic activity driven and oil price driven that will determine the chain margin for the olefins. Thank you. You're welcome. And our next question comes from the line of Asana Med with Alembic Global. Your line is now open. So, again, wanted to revisit the sort of recent, caustic spot price weakness we've seen in Asia. A couple of the sort of industrials we're talking about essentially dumping caustic product into China ahead of the re imposition of sanctions on them. I mean, did you hear similar things? Did that play a role as well? And obviously, as I did get reinforced on the 6th August, So if that's the case, that let me mean that this little blip we saw with blip, is that something that you guys have have sort of heard off as well? Definitely that could play a factor. We understand there's some Middle East and some of the Asian caustic spot, caustic spot, many of the merchant bio caustic has entered into long term contracts. So the volume of spot purchases and sales have been reduced. Hence, any movements in the supply and demand of spot caustic can influence prices quite a lot than before. So we will see the volatility of choppiness in the caustic spot price going forward. But we still believe that the global demand, economy is strong. Demand for caustic is growing and any excess capacities on a short term basis will be absorbed. And over the long term, we think that people are announcing potential new projects in chlor alkali and vitals business, primarily based on the very positive outlook they have on the cost of the vinyl business going forward on a global basis. Understood. Understood. Now, on the tariffs side of things, as I take a look at the list of different sort of chemical products included by the Chinese to be tariff. LDPE, LDPE are included, but HDP is So, how should we think about in a world where there are tariffs maybe it was? I mean, how do you think that would play out with a divergence, you know, tariff versus not in the different grades? That's a good question. Our understanding is that LD the tariff from China on the U. S. Polyethylene exports to China applies only to however polymer for LDP, not to co polymers, it applies to the specialty grades or linear load density, think the metallic is in grade and not the general purpose grade, the hexing or building general purpose grade of a linear low And as you said, not on high density polyethylene. So I think Chinese import needs are still strong and they have put tariffs only on the areas to have somewhat good sales efficiency and not putting tariffs on areas on products that they need to import. Very helpful. Thanks so much, Albert. And our next question comes the line of Kevin McCarthy with Vertical Research Partners. Your vinyl segment, did your Building Products business experience a normal seasonal pattern in the 2nd quarter versus the first quarter or were there any unusual impacts such as weather, for example? Kevin, we saw a good second quarter in terms of demand on the building product side. Of course, there was colder weather earlier in the first quarter. But we also saw a I think a normal second quarter and we've continued to see that as we move forward. Certainly, I know there have been lots of concerns about other dynamics headwinds I would say rates and such, but we've continued to see reasonably good demand in this space. Okay. And then as a follow-up, Albert, I was intrigued by your comment regarding slower growth in China. Can you elaborate on that in terms of the product lines where you're witnessing that dynamic and what you think might be causing it and whether and when these stimulus efforts could reverse that? Well, we have a PVC operation in China. So we have a somewhat of a window to understand the dynamics. Actually demand for our products pretty strong domestic in China. But as we read from various reports, that the some of the construction activities has been slowing down China, the Chinese government were clamping down on the some of the non regulated financing area banking area of China and that caused some of the construction loans activity slowdown. And I think with the start of the tariff dispute with the U. S, the Chinese government now, as we understand it, has change it as strategies and try to stimulate the economy through both fiscal and monetary policies. I see. That's helpful. And then lastly, if I may, what outages, if any, do you have planned for the company in the latter half of twenty eighteen? So Kevin, we have our normal planned activity, but nothing that I would call material it relates to quarter 3 or 4 that would be out of the ordinary. And so we're back to a more normalized level of maintenance activity and while there'll be some ebbs and flows in Q3 and Q4, nothing that I would call that would be out of the ordinary normal maintenance activity. Excellent. Thank you very much. You're welcome. Thank you. And our next question comes from the line of Jonas Oxgaard with Bernstein. Your line is now open. I want to ask about U. S. Caustic. So historically U. S. Caustic followed Asia caustic very well with trade. But right now, it seems to be well elevated over Asia. There's a little bit of weakness, but doesn't seem to be going down. Can you give some color on this and what's your thinking on? Is that sustainable? Well, the U. S. Economy, as you have heard, 2nd quarter GDP growth rate was 4.1%. Outlook for the rest of this year is strong and caustic demand follows the economy. So I think the U. S. Demand for caustic strong and support prices. And as we said earlier, we had close to $90 a turn of price increase announced in the first quarter and into the second quarter. And a large part of those pricing announced increases has been implemented. And now I think the prices remain flat now rather than increase, even though the industry have made some announcement price increase, but we're seeing a steady price going forward. Okay. Well, that still doesn't explain the arbitrage to Asia that doesn't seem to close. Well, as I said earlier, the spot market in Asia and in the world has somewhat reduced due to the bias getting into a more longer term contract purchase rather than a spot basis. And hence, the spot price hasn't had a big influence on domestic prices, either in Europe or US or certain parts, certain countries in Asia. Interesting. Okay. Thank you. Thank you. And our next question comes from the line of Aleksey Yefremov with Nomura Instinet. Your line is now open. Good morning. This is Matt Skowronski on for Aleksey. We'll start off. Our increasing logistics costs having an impact on margin for building And if so, are prices rising fast enough to kind of offset these costs? Yes, certainly, Matt, as you noted, we've certainly seen tightness in transportation and logistics services throughout the U. S. And certainly We use that in all of our business including building products and we have been able to push those costs through further downstream. It's something that we're closely monitoring. Got it. Thank you. And then secondly, did you quantify the styrene outage impact on 2Q earnings? No, it was small. We did not quantify it, but it was small. Thank Our next question comes from the line of Matthew Blair with Tudor Pickering Holt. Your line is now open. Hey, good morning, Albert and Steve. Good morning, Matthew. With the Lotte cracker, I think the nameplate capacity is 1,000,000 tons, but we've seen with some other crackers that have started up recently from like Dow and CPChem, they're either already expanding their crackers or they're running above 100% utilization. So I was wondering if there's any sort of upside on that, that 1.0 initial number from Lotte? Matthew, as we think about that, the facility, as you would imagine, anyone who's going to build a greenfield facility going to look at maybe having the ability to have some pre installed capacity to be able to expand if the economics are right. Certainly as we look at the outlook for that, there will be an opportunity to do cost effective debottlenecks at the at the right time and certainly that's part of the always the engineering and thinking of any new greenfield site. And so we'll assess the markets with our partner as we march forward to see if that makes sense and what those capital costs might be if we choose to run either at higher rates or do with some others as do a quick expansion or debottlenecking. Sounds good. And then, last August, you raised your dividend by 10%. This year, generally a stronger pricing environment plus a much better balance sheet. Could you talk about your expectations for the dividend going forward, especially given the current low yield? Well, Matthew, as you would imagine, we have a dialogue with our board on a regular basis. And as we think about the outlook the future, that'll be a discussion with the board and see what the board's conclusion is on that front. But that's a regular dialogue we have with the board, every quarter. Thank you. You're welcome. Thank you. And our next question comes from the line of Dan Daseke with RBC Capital Markets. Your line is now open. I have one more caustic in Asia. The 2+26 aluminum production curtailments in China last winter had a negative impact on prices. Do you see a similar theme playing out again this year? And then could we see could we actually see a greater impact this time around as China seems to have stepped up their inspections across the board? That's a good question. As you said, last year, I think starting November, during the winter months, there were curtailment in the 2 26 cities in China, the Northern China area. And we don't know they will implement the same policy again this year time will tell. Okay. And then just on PVC, we saw the increases in the U. S. Early this year, but then the domestic market's been kind of flat, during the seasonally strong period. Has this kind of played out relative to your expectations The demand PVC, we said, as we said, is strong. As you know, that the spot ethylene price has dropped substantially this year compared last year. And so PV ethylene is half of the PVC cost So I think the market is saying that you have improving margins and hence you shouldn't be increasing PVC prices further. That's the sentiments among the consultants and customers. Thank you. At this time, the Q and A session has now ended. Are there any closing remarks? We hope you'll join us again for our next conference call to discuss our third quarter results. Thank you. Call will be available for replay beginning 2 hours after the call has ended and may be accessed until 11:59 pm Eastern Time on Thursday, August 9, 2018. The replay can be accessed by calling the following numbers. Domestic caller should dial 8 50five-eight 50nine-two 1056. International callers may access the replay at 4 4 5373406. The access code for both numbers is 2,265,449. You may now disconnect and everyone have a great day.