Okay, good morning. I think we'll get started here in just a minute here and make sure we get all settled in. So welcome to Westlake Corporation's Teach in for our Housing and Infrastructure Products business, which we also refer to as hip. I'm John Zeller, Vice President and Treasurer. Of Westlake, and thank you for joining us here in person as well as live on our webcast.
For those of us here in person, just a couple housekeeping items. First, the exits to this room, which obviously were the entrance when you came in, are in the back of the room here on the right and on the left. Restrooms are out in the hallway, all the way down on the right. And then you've probably already seen our product showcase here in Concourse B. Many of the products that we'll talk about today are on display in Concourse B. So if you haven't had the chance to look at them yet, there'll be time later to do so.
And then lastly, after the program, there'll be a box lunch available. Welcome you to take it. Invite you to stay with us and have lunch with us after the program as well. So what are we going to hear today on the agenda? What are we going to hear today?
This is really designed to be a....... Take in a deeper dive into the Housing and Infrastructure Products business, the businesses that make up that, the products, the markets. How we go to market. This will be a deeper dive.
Into everything that makes up our HIP businesses. So who will you be hearing it from? So today we have Albert Chao, President and Chief Executive Officer, Steve Bender, Executive Vice President and Chief Financial Officer, Bob Buesinger, Executive Vice President, Housing and Infrastructure Products, IT and Digital. Scott Szwejbka, Vice President, Westlake Royal Building Products. Andre Battistin, Vice President, Westlake Pipe & Fittings, and Renee Havrilla, Vice President, Westlake Global Compounds. So that's who you'll be hearing more about, why HIP and the businesses that make up it and a little bit deeper dive. So before we get started with the presentations, we've got a short video presentation here that kind of highlights many of our products, the applications and why every piece matters.
Whether you're building a new home, updating an old one, or simply looking to improve the lives of those within it. Every house is a sum of its parts, which means that every piece that goes into that house, siding, trim, roofing, stone, windows, pipe and fittings, along with vinyl compounds, matters. Just look at this Cultured Stone Country Ledgestone.
Weighing in at a mere quarter of r eal stone, this masonry veneer is composed. Of a lightweight concrete mixture hand colored. With iron oxide pigments. Or how about this Unified Steel stone-coated roofing? Built to outlast asphalt shingles by nearly three times, this cutting-edge solution is fire resistant and helps improve energy efficiency by reflecting sunlight and heat away from your roof. Meanwhile, this Foundry specialty siding provides the look of real cedar shake in an innovative PVC material, delivering a seamless, gorgeous design that requires very little upkeep.
Then there's our rigid PVC conduit fittings like this junction box. A smooth interior surface makes wire pulls a breeze while its lightweight construct is both strong and resistant to fire and chemicals. Let's not forget our energy efficient. Molded PVC pool sweeps that can offer a 40%-60% reduction in head loss over conventional fittings, resulting in less energy use.
While these are just a few of the differentiated products in our portfolio.
Every piece gets just as much attention. Why? Because when you hold so many market leading positions, every piece matters.
Okay, next up we'll have Albert Chao, President and Chief Executive Officer. Albert, welcome to the stage. Okay, thank you.
Thank you, Johnathan. Good morning, ladies and gentlemen. Thank you for here today and thank you people. On the video today is a teaching on HIP and I want to start by giving a bit of a background how Westlake got into HIP. As you know, Westlake started in 1986 with a LDPE plant in Lake Charles, Louisiana. But soon after we acquired our first PVC plant and started up in 1991. Two years later in 1993, we bought our first PVC pipeline. As you know, integration is very important strategy that Westlake has is one of our competitive advantage and we felt it's important to go downstream. And pipe business is one of the biggest end markets PVC. So since 1993 we acquired during the pursuing several years we acquired several other PVC plants around the country.
But then in 2023, sorry 2013, we got into the specialty PVC pipe market with the acquisition of CertainTeed's PVC pipe business. And you hear a bit more about Certa-Lok. And all the special pipe we have is different from the commodity PVC pipe that we see on the ground in the next 11 years. From 2013 we really made seven major acquisitions and all of them have an impact on the hip business. In 2016 we bought the Axiall vinyl chlor-alkali business. But along with it it came with the PVC pipe, the Royal business in Canada and pipe and fitting. So we got into fitting business, you saw some of the elbows and we got into the siding and trim business from the Royal business which is part of Axiall as well as the global PVC compound business which was also part of Axiall.
So really the Axiall acquisition was not only to be in a larger position in chlor-alkali and PVC resin business, but really got us into the HIP or the housing infrastructure business. Then 3 years later, in 2019 we bought a Nakan business formerly from Total, the French chemical company and they are the global leading compound manufacturer for, you'll see some of later automotive dashboards, medical grades, one of the largest in Europe, medical grades and we're expanding that globally as well as wiring, cable and many other products. And in 2019 we also bought a DaVinci business which is one of the premier composite roofing business. It's fire resistant, wind resistant and replacing the slates and wood shingle business because it's fire resistant, it really has special properties. And of course in 2021 we made 3 major acquisitions all in the hip segment.
One is Boral. It got into also larger position in sidings and trim, but also it got into the roofing business. And we have metal coated roof, we have concrete roof, we have clay roofs. So got into the other specialty side of the roofing business. As you know, all the concrete and clay roofs are much better heat insulators than the typical asphalt shingle roofing you have in the market. And regarding the Lasco, which is one of the leading fitting business in the U.S. it was also 2021 acquisition. And lastly in Dimex, you'll hear a bit more about it also later on today, which is our first entry into using post-industrial recycled material to make consumer products, whether it's matting, flower beds, edging, using 100%, I think we use probably over 100 million pounds of post-consumer post-industrial recycled PVC, polyethylene, other thermoplastics, elastomers.
So going to page five, you hear that Westlake as you know is made of two complementary segments, namely the housing and infrastructure products. We mentioned HIP and Performance and Essential Materials or the PEM business which is more the polymers and chemicals business. And today you hear more details about the HIP business which includes three market leading businesses. First is the Westlake Royal Building Products which has either number 1 or 2 or 3 positions in the markets they serve and mostly in the exterior and interior of homes. And second is Westlake Pipe and Fittings mentioned they are number 2 or number 1 position in PVC pipe and fittings in the U.S. and Canada. Number three is Westlake Global Compounds, the world's leading PVC compound provider.
Both HIP and PEM business share many strengths including the capabilities to continuously innovate and develop products that customers want and also a culture of operational excellence and continuous improvement and disciplined capital allocation framework which with many successful acquisitions, integration that we mentioned earlier and ability to leverage Westlake's robust balance sheet. As you see today, HIP is guided by a highly experienced leadership team at Westlake to create long-term value for our shareholders. We go into page 6 before we dig into the presentation. I want to start by defining who we are at Westlake and how our mission drives our business. We strive to serve our customers by safely and reliably providing quality and sustainable products and services that enhance people's lives every day. The discipline that we apply to accomplish that goal inspired the theme of our event today Every Piece Matters.
Our customers want every component of their home to be perfect. After all, it is their home. As a business principle, Every Piece Matters also resonates with us in terms of the care with which we have built our business. Every person in our company matters, every product in our business matters and every business in our company matters. We have grown tremendously over the years, but every addition have been extremely deliberately thought through and executed and that is what has driven us becoming industry leaders and have Premier returns. Going to page seven the combined PEM and HIP portfolio has a number of benefits for Westlake and specifically in enabling the growth of HIP. We have more stability in our earnings and cash flows with the diversification offered from our two businesses.
PEM and HIP market drivers are uncorrelated and HIP's less capital intensive profile boosts our overall margins and our cash flow delivery. Westlake's scale and cash flows allow for consistent reinvestment in products and efficiency innovations. We are consistently delivering new market leading products features as well as manufacturing and customer service efficiencies through automation investments. Westlake's heritage of material science expertise combined with HIP's product and branding expertise thoroughly supports the introduction of new differentiated products. Our expansion in the large and fragmented market of housing infrastructure products expand the universe into which we can apply our proven expertise and experience. Emerging acquisitions, our strong balance sheet and cash flows allow us to opportunistically pursue deals that will augment our healthy organic growth profile. For these reasons we believe the value of Westlake's integrated portfolio of PEM and HIP.
Going to page 8 from the previous slide I discussed how our integrated portfolio provides financial benefits and this slide shows how our products are integrated across both PEM and HIP. One element of this integration is the ability to provide PVC from our cost-advantaged raw material feedstock in North America. Integration with PEM is most important for our global compound business not only in terms of supply chain benefits but also in terms of the ability to leverage our material science expertise and innovation capabilities to deliver new solutions to our customers. Our integrated supply chain also supports our plastic recycling initiatives which you will hear more about from our HIP leaders. In addition, today you're going to hear more about the diverse and complementary end products we offer across our HIP business and how they benefit particularly in regard to sales, distribution and product innovations.
Going to page nine. Our commitment to overall sustainability is rooted in a long-term perspective, a desire to deliver sustained excellence in our results and integrated into our strategy, and also this is what our customer society wants. Demonstrating care for our stakeholders is crucial to our long-term success, and we have been committed to those values since the founding of our business. It's not solely a corporate effort but an important initiative with each of our businesses, and you will hear more about it today. Innovations that allow us to use more recycled and scrap materials or less material overall contribute to our sustainability goals. We've also taken steps to reduce the scope 1 and 2 greenhouse gas emissions intensity, have made significant progress towards our goal of achieving a 20% reduction by 2030. Going to page 10, our long-term.
Excuse me. Our long-term outperformance is no accident and is rooted in our commitment to operational excellence. We also believe that our best days and opportunities for growth still lie ahead in order to achieve our goals. The key priorities for our operational success remain building on strong underlying demand in our segments with additional organic and inorganic extensions of our businesses into profitable related sectors. Continuing to allocate capital with a disciplined economic value added framework. Innovating across our products, solutions and operations by investing in technology, automation and AI and striving for continuous improvement. Taking proactive steps to empower employees ensuring they continue to attract, retain, inspire and protect them as they drive our success. Making disciplined progress on impactful sustainability solutions for our customers as well as our own sustainability goals. You will hear more about each of these initiatives from our presenters today.
Going to page 11 to summarize, this is our economic engine which we first shared with you at our Investor Day in 2022. Today you will hear from our HIP leaders how each of our business units are applying this formula to contribute to Westlake's success. Each business serves core markets with solid fundamental growth drivers that we believe will be strong for years to come supported by favorable demographic needs trends. We are innovating across the portfolio to better serve our customers, meet their needs and offer differentiated solutions. Our HIP businesses are strong financially and Westlake's robust balance sheet gives us the optionality to evaluate potential acquisitions across a broad and diverse portfolio.
Building on a strong track record of integrating past acquisitions and underpinning all of this, the Westlake operating system enables us to improve efficiency and drive margin expansions through continuous improvement, cost reductions, and integration of PEM and HIP. So in conclusion, once again, thank you for joining us this morning. We're excited to be able to drive and dive into our HIP business and hope you will get a better understanding of how this segment is creating value as part of the Westlake family. So I now welcome Bob to the podium to discuss the HIP segment.
All right, good morning. Thank you, Albert. And thank you all for being here. I'm Bob Buesinger. I'm the Executive Vice President of our housing and infrastructure products, or what we call shorthand HIP. I've been with Westlake for 14 years and basically I've been looking over our building products and our downstream pipe business since I joined in 2010 and we've grown significantly since then. Also immediately prior to joining Westlake, I was actually the president of the performance pipe group of Chevron Phillips Chemical where I had spent 32 years with Chevron Chemical and became Chevron Phillips Chemical. Thanks to all of you for attending today for our investor teach-in and also thanks to all those that are on with us virtually. We trust you'll find this session informative. The material we share today will discuss our leading diverse products, our markets and our growth opportunities.
Just to start, I'm on page 15. We continue to build out our leading positions across the attractive housing and infrastructure markets. It's driven by strong underlying demand and long term demand fundamentals for both residential construction and repair and remodel projects. We're delivering superior customer value with our wide breadth of our respected products, our expansive geographic reach and our leading product quality. We're focused on many different initiatives to improve our operating efficiency with our Westlake disciplined operational focus and some new technology like automation and robotics. I'll talk a little more about that later. To improve our safety and improve our productivity and this is resulting in sustained margin expansion. We're also investing in new product innovation to grow our share of the wallet and help our customers gain market share.
Finally, we're generating meaningful cross selling opportunities through our strong customer relationships as we grow our portfolio and our geographic coverage. As noted on slide 14, this kind of gives you an overview of our HIP segment. We have a diverse portfolio and a broad market exposure in which every piece matters. Our trailing twelve-month HIP revenue is approximately $4.3 billion comprised of about $3.6 billion in our housing sector which includes our products like siding, trim, roofing, stone windows and even our flexible compounds for wire coatings used in the home. Our infrastructure sector which includes water and sewer mains, things like agricultural irrigation piping systems, pool piping and fittings along with automotive and medical compounds. This represents about $700 million in revenue annually. We have approximately 21,800 customers. We operate 70 manufacturing sites around the globe with 45 distribution centers.
We have 34 market segments or product categories and approximately 62,000 SKUs and all looked after by our 8,100 employees. In our HIPPS segment, our revenue by business is split with about 50% in our Westlake Royal Building Products business which is all related to our housing component. The next largest is our Westlake Pipe and Fittings business which is both housing and infrastructure related. And finally our global compound business which is also housing and infrastructure related. All three of these business units have significant exposure to the growing housing industry including pipes and fittings for water and sewer plumbing. And many of our global compound products are used to make these pipes and fittings for new homes along with the electrical wire coatings and the electrical outlet boxes. Just touch on our end markets here for a second.
We're supported by favorable long-term trends such as U.S. housing starts. You can see on the top graph here. In the United States, we've been under built for about 15 years since the 2008 recession. Compared to the historical averages of about 1.5 million new homes a year. We need significant new home construction and just to keep up with demand over the next 10 years. Also, the demographics of the household formation years which are when people are typically forming families and then moving into homes. And that's in the middle graphs here. We are forecasted to grow over the next 6 years. And finally, in the repair and remodel expenditures, we continue to grow at about a 3.5% compounded annual growth rate as the aging housing inventory requires repairs.
As people stay in their homes longer, they purchase these homes with the lower interest rates and they prefer to stay where they are. Or the fact that the home values have maintained through this cycle of high interest rates gives homeowners the confidence to proceed with remodel projects. So about 50% of our total HIP business has exposure to the repair and remodel business. At Westlake, we see compelling growth opportunities across our HIP end markets. We estimate the total addressable market to be about $84 billion with expected growth rates in the range of 3%-5%. We're capturing share in this attractive market by offering customers product breadth that includes innovative, sustainable and durable products that are easy to install and require low maintenance. We're also leveraging our excellent customer relationships across our HIP business so we can cross sell our products.
We're benefiting from partnerships with our large nationwide builders that are gaining market share. I'll give you an example. We had a recent meeting with the top executives of one of the very large national new home builders and we discussed our growth opportunities with them and we focused on the siding and the cement roof tile business that we're currently doing and where we can expand that. But we asked them about decorative stone. They're buying from smaller regional players and their answer was, "We didn't even know you made stone. We weren't aware of that." We showed them our diverse stone portfolio and our national coverage due to our plants that are located in the East, the Midwest, and the West Coast. We're now supplying this builder with our stone.
So we're gaining market share with these large customers as we continue to explore more cross-selling opportunities for our leading products. And this is creating a win-win with these customers. On this slide here you can see slide 17. Westlake has grown via both acquisitions and organic investments to become a leader in North American building products. As you can see, our HIP segment is sizable based on revenue compared to some of our well-known competitors starting in 2016. As Albert mentioned, with the Axiall acquisition that included the Royal Building Products, we have significantly grown our business by acquiring Nakan Global Compounds and the DaVinci polymer composite roofing business in 2019. Then Lasco Fittings, the Dimex recycled compounds and Boral North American building products all in 2021 to create a leading provider of housing and infrastructure products.
Part of our growth strategy driving these acquisitions includes growing with our distribution customers. Our distribution customers are consolidating to grow and as they do that, we need to have multiple products and a diverse product line which we can supply nationally, which gives us a chance to grow our share with these same key customers. A few of our strong brands are noted on page 18. In Westlake Royal Building Products, we have products such as our Royal Siding, our TruExterior siding and trim, our DaVinci Roofing, our Newpoint Concrete Roof Tile, and our Cultured Stone and Eldorado Stone. All of these allow us to capture growth with key customers for residential, for new construction and repair and remodel. In the middle there we show our Westlake pipe and fitting systems.
These include our leading Certa-Lok and Certa-Set technologies to help us capture infrastructure and agricultural growth as much of North America's aging and leaking water system needs to be replaced. And our Westlake Global Compounds brands are leaders in building construction in the wire and cable applications, automotive interiors, medical devices and packaging. As you can see on this page 19, this is the extent of our exterior and interior building solutions for a typical home. When we say every piece matters, we've got from the pipe and the fittings that supply the water and take away the sewage to the siding, the windows, the roofing and the gutters, the trim, the shutters, the decking, the stone accents, even the electrical wire coatings. We have a Westlake product for your home.
We hope you will have a chance to go see our products in the display room next door in Concourse B, where we showcase our top quality and our durable products. We also continue to build on the excitement around our full portfolio of leading products, as many of you may have seen at the International Builders' Show this year. Okay, a technical glitch.
Try again.
There we go. We have a unique ability to leverage our established partnerships with key builders and distributors across our HIP portfolio. You can see some examples of some familiar names here on the slide, page 20. This is where we sell our leading brands such as concrete roof tile, decorative stone, plastic shutters and our composite polymer roof tiles. We also are geographically spaced. You can see by the map in the lower right with our manufacturing sites. We cover coast to coast around major growth markets and in the South, the Southeast and the West. While we still have good coverage for our customers, we still have room to grow. Just being a leader in market segments might make it seem like there's limited room for growth.
We feel we have many additional opportunities as our existing customers grow into new territories and we expand our offerings into new geographies. For example, we're the leading supplier of new home windows in Texas and we have the potential to expand that into adjacent states and adjacent regions and grow our window business. This is all for relatively small amounts of investment capital. This is just one example of the many possibilities. We are leveraging our technology to improve our safety, our productivity and reduce costs. One of the things we've been working on is implementing robotics for our various materials handling operations within our HIP segment. We have completed over 20 robotic installations in the last year.
In one example, where we installed robots to package our products at the end of the line, we've almost doubled our output of product to help us meet our customer needs. We're also delivering value to our customers with innovative products to meet their needs such as our new PVCO oriented PVC pipe for water transmission. This product uses 40% less raw material and produces a stronger pipe than the traditional manufacturing method. In our Westlake Global Compounds business, we tailor our solutions to specific customer needs. We have over 100 patents and a 30% vitality index which we define as % of sales from new products that are less than three years old. Using this technology and innovation to help us improve quality and productivity helps us continue to deliver value to our customers.
As I mentioned before, we have a large geographic footprint in North America with room for expansion due to the under built housing for the last 10+ years. We supply long lasting products to the right markets with a strong focus on quality and customer satisfaction. We're offering sustainable solutions such as our Pivotal compounds which contain post-industrial and post-consumer recycled resins. We also supply a 100% recycled compound from our Westlake Dimex business where we just launched a new co-extrude and we just launched a new co-extruded sewer pipe with recycled material in the middle layer. I wanted to just note on this slide here the aging infrastructure of the U.S. and it was rated by the American Society of Civil Engineers the ASCE as a C- in 2021 for the USA.
The infrastructure bill has been designed to begin spending to upgrade this aging infrastructure in the United States. I think we can all agree we don't like to see on the news these major water main breaks and it's wasting precious clean water due to the aging water infrastructure and the materials that have been failing. These infrastructure funds are targeted to water management, both fresh water and sewer pipes and fittings and over $55 billion has been earmarked for this effort. Our PVCO and our PVC pipes along with our fittings provide one of the most cost effective solutions. The geographic locations of our manufacturing sites allow us to support our customers in any part of the country. The American Society of Civil Engineers (ASCE) estimates over $400 billion needs to be spent by 2029 to fix our aging water systems.
So speaking of our large geographic footprint in North America, with significant growth in the home building in the Southeast, the South, and the West, our operations are well placed to capture this growth. We also have manufacturing operations in both Mexico and Canada supporting our customers there. Our geographically diverse manufacturing footprint which we continue to invest in in some expansion projects has resulted in a 7% organic HIP revenue compounded annual growth rate since 2020. Another example of this organic growth, we recently announced a PVCO pipe expansion for our Wichita Falls, Texas pipe plant where we will add new PVCO capacity over the next several years. Another opportunity shown as a case study here is the strong demand from builders for sustainable and durable products that are easy to install.
Our Westlake HIP products, they meet this need and they include our vinyl siding and trim products, our DaVinci composite roof tiles and our Versetta Stone. It's panelized and it installs like siding. You'll hear more on these durable products from Scott in just a minute. Our PVC and our PVCO pipe fittings and solutions are also sustainable, durable and easy to install. Our innovative solutions have continued to displace alternative, less desirable or less durable products. You're going to hear more about this from Andre later, but we have seen PVC pipe grow from 22% to 29% of the total potable water installed since 2018, making PVC pipe the most used material for water pipe in North America. Our customers, they want safe, durable products to ensure longevity of their buildings and their infrastructure, and our customers increasingly consider sustainable alternatives. Westlake HIP products are safe and durable.
Many are made from sustainable or recycled materials. For example, our Dimex business, which is focused on mechanically recycled materials and we have the ability to deliver finished products with high recycled content while typically providing for about a 15%-20% savings on the cost for the finished product applications. Dimex also produces recycled products such as landscape edging and also industrial and residential mats. This gives Westlake Dimex access to growth in the recycled compound business and we've seen a 10% increase in Dimex sales revenue with a 48% increase in our new single pellet Dimex Pivotal compounds in 2024 compared to a year ago. You're going to hear more about our sustainability and recycled Dimex products from Renee in just a little bit.
So, to kind of wrap up again, our key takeaways include we're building on our leading positions across the attractive housing and infrastructure markets, which are being driven by strong long-term underlying demand fundamentals for new home construction and repair and remodel. We're delivering superior customer value through our respected brands, our wide product breadth, and our geographic presence. We have ongoing initiatives to improve our operating efficiency across our organization, throughout our disciplined operational focus and our automation projects that I mentioned, which help us grow our margins and improve productivity and quality. We're investing in new products and increase our share of wallet as our customers also gain market share. And finally, we continue to generate meaningful cross-selling opportunities through our strong customer relationships and our expanding manufacturing and distribution footprint.
We are an essential partner for our key customers as we are winning with the winners. Thank you. Now I'd like to turn it over to Scott Szwejbka, our VP of Westlake Royal Building Products to discuss his business.
Good morning. I am Scott Szwejbka and I manage the Westlake Royal Building Products sector. Before we get into the presentation, I would cover a question that's very common at this point. My last name is pronounced Szwejbka and if you leave out the Z and the J, that pronunciation makes a lot more sense. We talk about our business as a.
Whole.
In a world where every piece matters. We make a lot of different pieces. So in our current portfolio, we make windows, siding and trim, shutters, mounts and vents. In the roofing category, we have clay, concrete and polymeric roofing. We do decorative stone as well and we'll talk a lot about those products at the end of the day. We have products for every single home in North America. Whether you're remodeling or building new, we have something for your house. We are roughly split 50/50 between remodel and new home construction. We'll go into some detail on that. We have exposure to great secular trends in both outdoor living remodel and in the fact that we're under built, significantly underbuilt in housing and will continue to grow there. We have a wide breadth of products. We can supply, like I said, something to every single house.
We can also cover the entire geography. All of Canada and the United States is in our shipping realm. We use all of that in combination with M and A to grow both inorganically and organically by cross-selling our products. That's at the core of our strategy and I'll talk to that in some detail on a later slide. At the end of the day, we make beautiful products. Our products look good, architects are in love with them and they're also durable, cost-effective and very low maintenance. This is us at a glance. Roughly 18,000 customers, 41 sites, 20 different product categories, 30,000 active SKUs right now and about 5,300 employees. A lot of people in this business. In the center section I mentioned, we're 50/50 roughly. That of course ebbs and flows over time, but over time 50/50 is about right.
Remodel and new home construction. Our customers are mainly distribution. So although we sell heavily to the individual consumer, we sell and partner with all of the big builders. Our actual sales and path to market is through the one-step and two-step distribution chain. So the one-steppers you're familiar with are the ABCs of the world: Beacon, SRS, who has made quite a noise with the Home Depot acquisition. Reverse that and then on the two-step side you have companies like BlueLinx and U.S. Lumber, which is now Specialty Building Products. That's how our products get to market. And then we also partner with many of the large builders, in fact all of them. So the D.R. Hortons, the Lennars, Pulte, Toll Brothers, all the people that you're hearing good positive outcomes from the street, those are our partners.
We're gaining share with the people who are gaining share. Bob mentioned we're under built. So 15 of the last 17 years we've fallen below the 1.5 million home starts that that we really need to keep up with population growth. That's good news. It's pent-up demand. So every time we don't make 1.5 million homes, we add to the gap which provides for a long-term good future for new home construction. I mentioned the coast-to-coast footprint. Very important. Our customer base is national. They want to deal with people who are also national. Of course they deal with local people when they have to, but their preference is to have a one-stop shop. Shifting preferences have really been in our benefits.
So during COVID a lot of people, including most of us in the room, learned that we better get used to being in our home a lot more, so we better love our space. And so remodel stepped up during those years, outdoor living stepped up. People realized that in the future they may spend a lot more time at home than they have in the past. And even today there's a lot more remote work, people are spending more time at their home and that suits us quite well. And then we're replacing products that in many cases don't work as well, are cost prohibitive or things like that. I'll mention trim and molding. The trim and molding business is still 70% wood, which needs to be repainted, which warps over time and so forth.
So there's an exchange of materials and a long term growth plan associated with that. Speaking of new homes, very long term growth plan there we talked about being under built. But not only are we under built, the demographics and age are set up such that we're at the proper time for the population to want to get into homes. So it's a nice combination from our perspective where people want homes, more and more people want homes and there aren't the homes available. So should be a nice long term growth trend. For us, affordability is a big issue. So if you look at the product categories we offer, they're very cost effective. There is no less expensive way to clad your home than vinyl siding.
So we provide the beautiful products that go into the new homes, but also help with the affordability problem that people are dealing with these days. Another comment I would make as we lead into remodel is that 20 years from now, when people decide they want a new look on their house, they tend to remodel with the products that are on the house. So 20 years from now, when the homeowner who has a vinyl sided house decides to update to new colors or new styles, they're most likely going to replace with vinyl siding. So all the share gain we're getting today in vinyl siding will help us 20 years from now when they remodel that house. If we talk about remodel, a couple things to take from this slide.
Remodel tends to be a higher margin business and that makes sense if you think about it because when a large tract builder builds 20 of the same basic floor plan in a giant subdivision, it's about efficiency and it's about scale and it's about standardization. But every single remodel project in the country is customized. They're all individual to the project in mind. So that value add tends to lead to higher margins. It's not always true, but as a general rule of thumb it is. The other thing I would mention on remodel is looking at the chart, despite the downturn, the small downturn in the Great Recession, you see a really steady growth trend up. Remodel is exceptionally resilient to whatever's going on in the country from an economic standpoint, from a political standpoint, people tend to remodel.
You see the little tick up during COVID 2020 and 2021 and then you don't see a dramatic fall off expected even in this year or next year. It flattens a little bit and then it gets right back on the trend line. That's the expectation. The reason is, is because remodel is something that people tend to do regardless of the housing situation. And I'll give an example. When houses aren't selling like today, for example, when interest rates are so high and you have to give up your 3% mortgage to get a 6.5%, people learn to love their space. They decide I can't upgrade my house, so I'll remodel it instead. You have good remodel spend. When houses are moving and the market's very quick, people do a small remodel before they sell the house to get it ready for sale.
It sells and the new people come in and they look at it and they go, okay, I want a little bit different. And they do a small remodel. So what tends to happen in our sector is remodel stays pretty small, steady, and that's what the data show. Another thing to mention, and I kind of touched on it before, is the more houses that exist in total, the more remodel is going on. So as we continue to build houses, we don't destroy them at the same rate. There's more and more houses in existence. And so as time progresses, a lot of those houses will need remodel. And that again fits into this sector. So here's a bit of a track record of our history. You might wonder why Royal is in the title. Royal was the start of the business 54 years ago in Canada.
This business started as Royal Building Products and it actually started with window lineals. They extruded the window lineals for vinyl windows that expanded into vinyl siding in the 1990s. They recognized this was in Canada, by the way, mostly a Canadian focused business. In the 1990s, they realized that another segment they needed to touch on was aluminum, and a little bit of that was aluminum siding. But what you really should think about is guttering and flashing and rainwear. That's the products they got into in the 1990s. 1998, we launched the Foundry product line. So that's a cedar shake vinyl siding. It's extruded, looks a lot like a cedar shake, and also tends to have our highest recycled content in that product.
In 2001, they expand the product portfolio and this is where you really see the start of the long-term strategy I'm going to talk about. They realized that the same people buying siding are also buying trim and molding. So they bought into the Marley Moldings and really got into the siding or the trim and molding business. In 2011, they purchased the Crane business, which was exterior portfolio. It's another siding business, vinyl siding, centered out of Columbus, Ohio. So we expanded in that direction and we also launched Select Siding, which hopefully you saw next door feels much more like a wood. It is a foamed or a cellular PVC product, much thicker, much more robust than a standard vinyl siding. In 2016, that's when Westlake purchases Axiall and gets into really an expanded HIP segment. In 2017, not mentioned here, they hired me.
I'm sure that was just an oversight that they didn't put that on the chart. 2019, we pick up DaVinci Roofscapes, and DaVinci, I have a whole slide on that to talk about about. But DaVinci is a polymeric roofing material, very resistant to hail and fire, lightweight and replacing natural materials. And then the big one in 2021, when we acquired Boral, that's when our strategy really started to lend itself to success. We added the roofing business, the roof tile business. We added the stone, we added the windows, and we really geographically filled out the country and product mix significantly expand, expanded. I think I just went to. So what do we do? I talked about the 20 different product categories. With those product categories also come a lot of very strong brands.
So if you look at what we actually sell to the market, on the siding side, we have the Royal Siding, we have Exterior Portfolio, and we have TruExterior, which is a poly-ash product made from polyurethane and fly ash. It's a very board-like feeling, a very solid product that works with anybody's cladding. So the advantage of TruExterior is it really doesn't matter if you use our siding. Of course, we prefer if you do. But you can still use our trim package that goes along with it. On the trim molding side, we're known as Royal. You'll see that a lot in the big box stores. We also provide Kleer trim and Skytrim. Our newest addition, decorative stone, Cultured Stone. The first brand listed there was actually the inventor of the segment.
So 50 years ago, they came up with the idea of producing stone rather than using natural cut stone. And that was the brand that started it all. So very strong brand there. We've added to it Eldorado Stone, and Bob touched on Versetta Stone. One of the things we really work to do is to solve our customers problems. They have an issue. We try to help. Labor is tough everywhere. You know, it's getting consistently harder and harder to find labor. What Versetta Stone is, is it's a panelized stone, so you get the exact same look of an individual stone stacked up and placed on a wall, but it's in a panelized form. So the installation cost and the installation labor significantly lower. Talking about roofing, Bob mentioned our big brands in concrete roof tile and DaVinci there as well. National presence, very strong windows.
Windows is an interesting opportunity for us. So Bob talked about how strong we are in Texas. We're also strong around Atlanta, but that's about it. We sell into multiple other states, but that's where our strength lies. We would prefer to be a national player. It fits with our customer base. It fits with our strategy. So Windows is an opportunity for us to grow. And then the outdoor living category, certainly during COVID but even before and post, people learn to love their back door, their backyards, and their outdoor living area. And we have a number of products with our Kindred product line and our Zuri decking that address outdoor living. This slide represents the heart of our strategy. If you want to know how we grow faster than the competition, this is how we're really getting it done.
It's about cross selling, using our relationships to cross sell to customers, our other products. So I'll give you an example of what does this mean in the real world. If you look at Texas, huge housing market has been for a long time. I used to sell brick into the market, but for Royal, it was a relatively small market. There's not a lot of vinyl siding in Texas, so it was not ignored, but certainly not focused on with our Windows acquisition and the strength in Texas. Suddenly we're meeting with all of the large new home builders and talking about product categories. And we're saying, hey, you know, we have stone, we have stone alternatives, we have trim alternatives.
So suddenly we're selling into Texas at a much higher rate than we used to, utilizing the relationships we have with both the big builders and the distribution groups to highlight, hey, we have these other products. Would you be interested in buying them? They are interested because again, as I mentioned, they prefer to deal with national suppliers as well. They're not looking for 50 different vendors. They prefer two or three. And it fits in with that category. If you look at the list at the bottom of who our customers are, the other thing you notice is they are the winners. So Bob mentioned it, I'll mention it a couple of times, is that we're gaining share with the people who are gaining share, which is just doubling our gain on the market and how we're proceeding.
Technology is a fun one for me to talk to in this particular segment because whenever we do an IT project or anything related to the phones, we have to make sure that people understand we still need dedicated fax lines. There's probably a lot of people in this room who have never seen an actual fax, but in our world, we still have customers who order via fax machine. So we have to have that capability. Another thing is if any of you have been through a remodel recently, or really even not that recently, but recently especially, you probably ended up at the kitchen table with somebody giving you the final pitch with a printout and a bunch of handwritten numbers on it for a quote. That's very typical in our industry. Very low tech. Now, there are, of course, exceptions to that.
There are people advancing, we're advancing, we're getting prepared for it. But what I think is great about this is we don't have to invent anything. The technology is there, we all use it on our phone. I mean, I couldn't order anything today if I didn't have a phone. So the technology's there, the platforms are established. When our customer base is prepared to move, we're ready to add value. And in some cases we already are. But in those cases with the stragglers, when they're ready to advance technologically and have their life get easier, we're certainly ready to move that way. Some examples. HomePlay is an example in our category. So if you want to see what your home looks like with our siding on, we can let you design it while sitting at your computer with your actual house.
So you can pick the siding and trim combinations, you can pick the shutters. The program will show it all to you. Internally, we use Salesforce. We continue to expand our use as both a CRM tool, but also as a tracking mechanism so that we can hopefully predict what our customers need and when they're going to need it. We're trying to solve their problems and continually strengthen that relationship. Salesforce helps us in that. And then automation, I'm going to talk about that a little bit more on a later slide. But automation in both our business processes as well as our actual physical plants and driving automation to improve our productivity. We talked about this, but I wanted to expand just a little bit more on the cross selling opportunities. This is really just again, I can't strengthen enough.
This is at the core of our strategy, being able to present to customers that we have established relationships with the ability to sell different things to them or to hear from them what else they need. Once it goes through the four walls of a distributor, if we get it in the four walls, they also help us sell it. They help us cross-sell it. So these distribution branches have limited shelf space. Once you get on it, that's what they're going to sell. That's what they have available. That's what the customers want. So the more you can put inside those four walls, the more you're going to expand your cross-selling. We are one of the few manufacturers in the space that can provide whatever you want across the country. That's another advantage. I touched on it.
But being able to provide everywhere in the country geographically, big plus. For our business segment, we picked a few case studies to talk about in the business. Obviously there's a lot of things we could discuss and I really enjoy talking about the business go on for a long time. But we picked a few, and on this slide I wanted to highlight a couple things. We talked about low maintenance in today's world, probably less so than the past. Although as I get older, I feel like the old man saying that. But the reality is people don't want to spend time working on their house. If you look at vinyl siding as an example, vinyl siding isn't painted to begin with. You choose the color that you'd like to have on the house. So therefore there's no way you're going to repaint it.
Five years from now, it lasts forever. The trim that's in the house, the white trim, that's PVC based. It's not painted. It's white by nature. We make it white. So you don't have to repaint it. You don't have to worry about it cracking or warping over time. Low maintenance again. In addition to that, our products are more and more weather resistant. As we've all seen more and more weather events, especially just in the last few months, you want products that to the best of our ability can withstand heavy rains and hail, can withstand winds and so forth. Great example of that is our DaVinci product category, the roofing that I'm going to talk about. Hail resistant, wind resistant, fire resistant, great product for a roof. And living in Texas, I've already redone my roof twice, so asphalt roofing.
So I would prefer if I could get a DaVinci roof on my establishment. So those are all important things. The other thing I would mention here again is the idea that we're substituting for alternative materials. So with DaVinci, we're replacing natural cedar shake and natural slate products. With our trim and molding products, we're replacing wood, which still has 70% of the product market. Efficiency is a big item. We didn't spend much time on it so far, but I wanted to spend some time. We focus a lot on the top line growth. How are we going to grow organically? How are we going to grow inorganically? But from a margin perspective, we also have a lot of opportunity in just our production efficiency. I know the picture is a little hard to see.
What's in the middle of the page is a robot, a single robot that's picking up roof tiles, stacking it up. Each roof tile weighs around 12 pounds. Stacking it up and then automatically banding it, loading it onto a pallet and preparing it for shipment to the job site. This replaces 12 workers. When you put this in place, additionally, it adds throughput because it tends to be faster than what we had in place with the human beings. It also adds quality. It's doing the same thing every time repeatedly. And if something is wrong with the product, shape, quality or things like that, it just won't function. It'll stop and tell you you have something to fix. So this is a big plus. We sell this heavily to the big builders who are worried about supply.
That's what they tend to be worried about these days, is by automating, we're guaranteeing as much as we can, a much more consistent supply and a higher output. This particular robot was the first of its generation. We designed and came up with the prototype, which now we're going to duplicate and we can drop it into any of our production facilities. And this is just one example of the automation that's going in. We're using it across the board as labor gets tougher and tougher to find and most recently, quite, quite expensive compared to where it used to be. These automation projects are advancing. They help us with safety, they help us with quality, and they also lower our costs. And so part of the margin growth that we're driving for isn't top line growth.
It's being more efficient in our cost structure so that we can be more profitable. I was going to mention DaVinci roofing. So DaVinci roofing is polymeric. It replaces natural cedar shake and slate. It looks like an individual piece. It's very decorative, it's very attractive. And in some markets, like California, for example, you can't use new cedar shake anymore due to the fire hazard. So as the wildfires have become more common, more prevalent, people really are concerned because if you put wood on your roof, it's probably going to catch fire fairly easily. So DaVinci offers an alternative product that looks great, is easier to install, is lightweight.
It's another issue if you're putting real slate on your roof, you need to have a pretty strong roof, it's a heavy product, whereas if you put DaVinci on it, it's relatively lightweight. You don't need the extra structure to build it. It's also wind resistant. We can handle up to 110 miles an hour with this product without it lifting off. So these straight line winds that again appear to be more common, your DaVinci roof will hold up to it. So with DaVinci, you have a real value proposition where you're getting a lower cost than the natural products. You're getting some fire protection, you're getting wind resistance and you're getting hail resistance and it just looks great. It's a great product. We picked it up, I showed you on the diagram. And since our acquisition, we have tripled the capacity at this site.
So this is a very fast growing product. And the reason for that is it's still relatively new to market across the country. People know of DaVinci, but if you really look at who's actively installing it and actively utilizing it, it's relatively new. So we have a lot of runway yet on DaVinci Roofing to continue to expand. Energy efficiency, sustainability. These are also at the forefront of what we think about these days. Our products are sustainable. PVC as a product category, PVC is infinitely recyclable. So if we can get it back, we can make it again. We can reform PVC into something else. That's a great thing. On the stone side, we're already using 117 million pounds of recycled material now into our products, so we have a strong recycled content. I mentioned our Foundry shake product.
We can run up to 90% recycled product in that siding category. Additionally, we've talked about it before, very low maintenance products as well. So for a vinyl siding house, you wash it, you wash it down with a pressure washer if it gets dirty and then your maintenance is done. So very low maintenance and then energy efficiency. So our cool roof systems on the concrete roof tile side add a lot of value. They keep the solar energy from getting into the attic, which thus keeps your house cooler and keeps your energy costs down. And then, just as a personal experience, I re-sided. I own a house in Houston inside the Beltway. And although it's not super loud there, it's also not particularly quiet compared to the country.
I'm in New York, so you guys obviously know about noise, but I will tell you, we upgraded to the solid core siding, which has a blown foam backing on it. We were really surprised. We thought it would help with energy a little bit. That was our thought process. But what we learned was it also dampens the noise rather substantially. So now inside the house, it's much quieter in the evenings. Another advantage and another product attribute that we're trying to promote to continue to sell our product category. This all leads to this slide. How do we grow? What's the future look like? You start on the far left side and we just talk about GDP. We're going to grow, the economy is going to grow, we're going to grow with it. That's all great, but that's also baseline data.
The next column represents how's the industry going to do? So we talked about under built homes, we talked about favorable demographics of people now creating new households. We talked about the aging households that exist which are going to help remodel and the strength and resiliency of remodel that helps the entire industry. So it's good for us, but it's good for everybody. So then how do we grow beyond what the industry grows? That's the next two columns. So on the organic share growth, this is where we talked about the cross selling opportunities that we have and the relationships with all of the people who are currently winning today. By teaming up with D.R. Horton and Pulte and Toll Brothers, you're really setting up with the group that's expanding the fastest in the country.
By lining up with ABC and SRS and Beacon on the distribution side, they too are taking share. So by cross selling to them, expand, expanding our presence within their four walls, while they're expanding the size of their four walls, you get an added boost to your growth. And that leads into the fourth column, which is inorganic growth, which is acquisition. So things to mention there. First of all, we're part of Westlake and you've seen Westlake has an extremely strong balance sheet. So when opportunities come along for us to look at acquisition growth, the capital is there, we can invest, we can grow the business when we determine that there's a value for the fit. Additionally, Westlake has a track record of successful integrations. When we buy something, we integrate it into the Westlake culture and we drive success and value that way.
So we have a track record of success and a platform on which to do it. And then lastly, column three leads into column four. We know when we acquire a new business that fits in with our strategy, we know we'll grow it because we know who our partners are. We already know what it is they're looking for for. We're looking for products that add to that, that complement that, that continue to grow the business beyond what the market will utilizing our existing relationships. So in conclusion, a few things just to bring every piece does matter. We're awfully good at the pieces that we provide. We have strong demographics and strong future trends that will continue to strengthen and undergird our sector.
We have a lot of products, a lot of geography to cover and these are all low cost, low maintenance products that people are looking for today. We have a growth plan with M and A, inorganic and organic growth that will allow us to grow beyond the market. With that, I think we're headed toward a break. I'm going to turn it over to John to cover that. After the break, we'll come back with Andre in the pipe and fittings business. Okay, thank you, Scott. As he mentioned, we are at break time, so it's about 10:00 A.M., 10-ish or so. We reconvene around 10:20 A.M. back in here and so about a 10-minute break or so and then we'll start.
With Pipe and Fittings.
Our ambition is.
Soaring and our momentum is building. From the innovations we develop to the.
Dreams we express.
To the connections we form.
Hey, Kevin.
It's never been a better time to.
Define what it means to be boundless.
It means our momentum is carrying us.
To a place where design transforming elements are made real and livable.
Where a wealth of Westlake Royal Building.
Products, materials and solutions define spaces that surround and shelter us, but also inspire us. It means combining unfading beauty and unrivaled performance in ways that embody more preferences.
And styles than ever.
For builders, designers, contractors and homeowners, this.
Is what it feels like to merge timeless dimension with next level engineering. To be as confident as we want.
As bold as we dare.
This is just the beginning of what.
It means to be boundless.
Across styles, neighborhoods, the industry, and North.
America, we're expressing more deeply, innovating more.
Thoroughly and connecting more widely.
Together, we've got the products to do.
Everything and the power to do even more.
We've got all the momentum we need to be boundless. Stone is not a static presence.
It sets the scene.
An evening audience on opening night, lending ears to a performance practice, the taste tester to new culinary creations. In the spaces where a connection is central, Stone has the power to set a tone, deliver a feeling, and let.
Your legacy live within walls.
At Eldorado Stone, we design with.
These ideas in mind.
We believe your house is more than.
A foundation, where every room can have its own story.
In a chapter you get to write. Bedrooms can shift to the surreal. Patios can invite and invigorate. We believe the room, the right stone, can transform your space. Nurturing humble materials to create any World.
Within your home.
Extraordinary can begin small.
It's the start of something beautiful.
A good roof makes for a great home. DaVinci Roofscapes' legacy of beautiful roofing combined with its ingeniously engineered design makes it look better and last longer. Our state-of-the-art composite roofing technique is what has made us a leader in the industry for over two decades. With a variety of colors and styles to match your taste and stand up strong no matter the weather, DaVinci's unique composite construction outperform standard roofing with class A fire rating, class 4 impact rating and 110-mile-an-hour wind rating. Maintain the character of your home without having to deal with time-consuming and costly upkeep. Visually stunning and versatile, DaVinci offers the beauty of natural slate and cedar shake in different tile options, giving you the flexibility to meet your aesthetic vision as well as respect your budget.
Now also offering hand split shake siding allowing you to expand the beauty of your home from top to bottom. Whether you value the timely installation of single width, the authenticity of multi width or the beauty of Provence at a fraction of the cost, we offer all these tile options and more in both classic slate and cedar shape. Whatever your roofing needs, we have products to fit them. DaVinci offers long life lightweight, low maintenance roofing with color stability, little waste and low temperature installation that competitors just can't keep up with. We love making housing dreams a reality and are dedicated to offering excellent service from the inside out.
Want to Learn more?
Visit DaVinci Roofscapes.com to get started on your roof project today or call us at 800-328-4624.
Underneath the surface and behind the scenes of all you do is where you'll find us. While you build cities, we help you connect communities. While you farm the land, we help you grow more food. Because supporting this, this and even this is this. We are Westlake Pipe & Fittings.
We build the systems that move water.
Sustaining cities, towns, homes, schools, neighborhoods and farms. Making communities healthier and bringing long lasting solutions for the next generation.
Because it'll last generations.
These are the systems that make everything you do possible. Building a stronger, better foundation to make.
Our communities stronger and better for years to come.
Westlake Pipe and Fittings A Better Foundation.
My name is Todd Weir.
I'm Territory Manager for Westlake Pipe & Fittings.
I'm Roger Carson.
I'm one of the owners of Carson Supply.
My name is Melissa Millette. This is my reserve.
I'm Evan Hellyer.
I am the construction manager for Bridge Excavating. Westlake Pipe and Fittings is working with contractors big and small in cities, towns, villages, plumbing, electrical, municipal. Our products serve all levels of contractors in all the markets. The infrastructure in every community is aging everywhere across Canada, every city, town, village. There is old iron water mains, old wood water mains that were installed 70, 80 years ago. Those need to be replaced.
People that were born and raised here.
They've never had tap water.
We have to boil our water for up to five minutes and then we can drink it.
The Ontario government had a program to upgrade their system to make sure that the Chippewas of Nawash were getting quality water for their residents. We service about 700 families here in the community.
We're getting them off old wells, we're.
Getting them off cisterns.
Chippewas Nawash has about 13 km of.
Pipe on that job, which kind of.
Equates into 18 truckloads of pipe for our area. This is a massive project.
We've never seen anything of this magnitude.
It was a very large job.
To come out in the middle of the pandemic.
Supply chain issues were going to.
be a huge problem getting pipe for that particular job. It was ideal timing for us to introduce PVCO on this particular job. PVCO, it's all cross-linked to make the product stronger. It's lighter, it's easier to carry, don't.
Need as big of equipment to move it around. So it makes my life easier.
It also has greater flow characteristics because the wall of the pipe is thinner. The flow of the water through the.
Pipe is going to be greater.
It's actually more resilient to impact damage. As far as our crew, we quite like it because it's easier for the men to move around and it actually goes together quite nicely. They can bury it as deep as they want. It offers the solution that they need right now to replace a substandard water system with a completely safe and durable water distribution system.
I can never remember going to a tap here and running water. I'm in my 40s and I've never done that here.
That's huge.
PVCO is going to deliver clean, sustainable drinking water to the community of Chippewa, Nawash, long after I will exit this business. It will last, you know, likely in excess of 100 years.
Without water, nothing on this planet will survive, including us.
Water is without a doubt the most.
Important infrastructure is always changing.
It always needs to be renewed, upgraded.
Communities choose Westlake Pipe & Fittings as a solution for that.
Electricity is a necessity for all of us. It is essential that we have.
It and we need it.
We've partnered up with Conelco over 2 years ago to help them support this master planned community in Richmond Hill.
On average, a subdivision of this size could be anywhere between 300-400,000 ft of pipe used. Our pipe usage alone is well over.
2 million feet a year.
There's many years of involvement and planning to get electricity to a new subdivision like this. A lot of different industries involved developers and contractors to make that switch just turn on.
You just turn on the light switch and don't really think I'm lucky to have this electricity.
What we do at Westlake Pipe and Fittings is make sure that we encase that wire that brings electricity to our industrial buildings, high-rise buildings or any residential home. We service mostly electrical aspects. We manufacture deep burial, underground monoblocks, rigid conduit ends, elbows, junction boxes. Anything you would need to be able to run a wire through a pipe to be able to service the home.
Industry that we need.
There's a master utility box that all the power goes into and then gets distributed throughout the community. It will eventually end up to all the homes and when the flick of a switch, light comes on.
As a contractor, we're always faced with challenges on getting our system in the ground safely. Working with the Westlake team, they're able to make the install a lot easier. Westlake providing our industry a good product that will outlive the life of the cables that we put in.
To have it protected by something very durable and sustainable is critical for sure.
That makes our home feel safer too.
It just gives you that peace of mind that our utility electrical grid is.
Sound and safe with the added protection.
Of Westlake Pipe and Fittings systems.
My name is Todd Weir. I'm Territory Manager for Westlake Pipe & Fittings.
I'm Roger Carson.
I'm one of the owners of Carson Supply.
My name is Melissa Millette. This is my reserve.
I'm Evan Hellyer.
I am the construction manager for Bridge Excavating. Westlake Pipe & Fittings is working with contractors big and small in cities, towns, villages, plumbing, electrical, municipal. Our products service all levels of contractors in all the markets. The infrastructure in every community is aging everywhere across Canada, every city, town, village, there is old iron water mains, old wood water mains that were installed 70, 80 years ago. Those need to be replaced.
People that were born and raised here, they've never had tap water.
We have to boil our water for up to five minutes and then we can drink it.
The Ontario government had a program to.
Upgrade their system to make sure that the Chippewas and Nawash were getting quality water for their residents. We service about 700 families here in the community.
We're getting them off old water wells, we're getting them off cisterns.
of Nawash has about 13 km of.
Pipe on that job, which kind of equates into 18.
Okay, I think we'll get started here in just a minute.
Okay, thank you. We'll get restarted here in just a minute.
Hopefully everybody had a chance to get recaffeinated this morning. Okay, next we'll hear about our pipe and fittings business and I'll introduce Andre Battistin, our Vice President of Westlake Pipe & Fittings. Andrew.
Well, good morning. I am Andre Battistin, the Vice President of Westlake Pipe & Fittings. I've been working in the PVC pipe business for a bit more than 38 years, including 8 years with Westlake. And during that period of time I've had the opportunity to visit plants, such as suppliers and customers, all over the world. PVC piping business PVC pipe and fittings is a business that I know well. Let me start my presentation by covering the following 5 key messages. We are one of the nation's largest providers of PVC-based water management solutions to a variety of municipal infrastructure and residential markets. We serve water infrastructure markets with robust long-term demand trends for both clean, fresh drinking water and waste and storm solutions. And this is for both new construction and replacement.
We provide highly innovative products and integrated solutions including pipe and fitting systems as well as lightweight, more sustainable alternatives. We deliver value to our customers through high quality service and distribution that ensures prompt and reliable delivery across our footprint. PVC offers technical and value advantages over alternate materials leading to pipe market share gains through ongoing investment and replacing of aging infrastructure. At a glance we service 2,700 customers with 15 distribution centers and 15 manufacturing sites across six segments. We manufacture about 30,000 different SKUs and employ 1,700 employees. The growth drivers for PVC pipe and fittings are municipal and government spending for infrastructure enhancements. 33% of all pipe is over 50 years old. The EPA estimates that $420 billion investment is needed to maintain underground water distribution over the next 20 years. There is a strong long term housing construction demand.
John Burns estimates that 18.6 million new homes are needed in the U.S. over the next 10 years. Each new home requires potable water, sewer and plumbing pipes and in many cases electrical pipe. Fittings for an electric car charging station. Multi-story and high-rise construction drives demand for many of our unique products. I'll remind you that PVC is the preferred material for potable water and sewer installations, increasing from 22%-29% of the total potable water pipe installed since 2018, as well as growing demand for agricultural irrigations for which we have many unique solutions. Westlake Pipe & Fittings services all major markets with its strategic footprint. As you can see from our plant and distribution center footprint, we are well positioned to capitalize on areas with the most housing starts and the greatest infrastructure needs.
Having a global footprint is also very desirable for our customers as they want to buy all products from the same customer with one purchase order everything delivered on full and on time. Now we have been in the PVC business for over 30 years. From 1993 to 2009 Westlake did a number of acquisitions starting with Wichita Falls, Texas plants then in Janesville, Wisconsin, Booneville, Mississippi, in Yucca, Arizona, and Leola, Pennsylvania. In 2013 Westlake acquired the CertainTeed very profitable specialty pipe plants in McPherson, Kansas, and Lodi, California. This continued in 2016 with the acquisition of Axiall which added two plants in Canada in Woodbridge, Ontario, in Abbotsford, British Columbia, as well as our first Fittings injection molding plant in Shelby, Michigan.
Then recently in 2021 we acquired the Lasco Fittings injection molding plant in Brownsville, Tennessee and we launched an innovative new molecularly oriented PVC pipe in Ontario, Canada that we call PVCO. Later on in this presentation I'm actually going to show you samples of what PVCO looks like. I have some with me and this trend continues with the recent announcement of a new groundbreaking PVCO plant in Wichita Falls, Texas. The systematic growth through acquisition, innovative new products and strategic investments has enabled Westlake Pipe and Fittings to have a global footprint of plants across North America. We have a leading market position with very attractive growth opportunities. Our total addressable market is $36 billion. The overall pipe and fittings market is expected to grow at 4% while Westlake Pipe and Fittings is expected to have a 4%-6% organic cumulative annual growth rate.
We operate in a very bullish market where our growth is bolstered by unique integrated solutions and a leading market position. Our leading North American presence provides scale and capability to enable strong partnerships with key distributors. PVC is displacing other types of materials for pipe such as cast iron, ductile iron and concrete, enabling Westlake Pipe and Fittings to gain market share. I'll remind you that PVC has the lowest failure rate of alternative water pipe materials. It has the lowest environmental impact over its life cycle phase which includes production, transportation, installation and use. Among PVC, high density polyethylene, ductile iron and concrete pipes. We are a leading provider of integrated pipe and fitting solutions for water management ecosystem. The picture at the right shows all of the applications to which we provide water management solutions.
For example, we provide large diameter water and sewer transmission lines for new housing developments. We have fabricated fittings that connect large diameter municipal lines to small diameter residential and commercial water and sewer systems. We also believe in innovative products like PVCO which provides approximately 10% more internal flow area compared to traditional PVC pipes and Certa-Lok which provides superior connections and can be used under roads, rivers and other critical infrastructures without disruptions. We are well positioned to capitalize on the growing demand for our products. The key drivers for our business are the needs for more homes and the favorable demographics. As you can appreciate, every new home built requires water, sewer and plumbing pipe and fittings. And as mentioned earlier, in many cases it also requires electrical conduit for an electric car charging station, all of which are products that we manufacture and sell.
As was mentioned earlier by Bob today, underbuilding of homes since the 2007-2009 financial recession created a significant cumulative deficit in available homes supporting long-term growth. The increasing amount of the U.S. population which will be in the peak household formation years provides for favorable demographics which continues to fuel growth for our products. I think it's important to mention that we have the right assets in the right locations to capitalize on infrastructure spending trends. The American Society of Civil Engineers estimates that the annual drinking water and wastewater investment gap will grow to $434 billion by 2029. Governments are investing to address the need driven by new construction and aging infrastructure. As a leading provider of PVC pipe solutions, we are well positioned to benefit from these needs and investments. We are well developed. We are also developing innovative solutions to meet agricultural needs.
As an important growth market to us, irrigation is responsible for 70% of fresh water withdrawals worldwide. The picture is an actual side by side installation of Certa-Set versus aluminum pipe in an irrigation application. As you can see, Certa-Set which is to the left has much better yields. Certa-Set systems are designed to prevent leakage and save labor time with modular sections. They have multiple studies completed with the universities in California have demonstrated water savings and improved application uniformity using Certa-Set pipe compared to standard aluminum pipe. The potential market is the replacement of aluminum pipe with Certa-Set, where each acre of irrigated farms requires 1,100 ft of Certa-Set. Right now only 7% of the total irrigated farms in California are using Certa-Set, so the market potential is huge. We have a robust North American footprint and distribution centers which are competitive advantages.
Large diameter pipe is typically sold within 500 miles of the production site due to high shipping costs. Westlake's broad and geographically well placed production footprint enables strong distribution coverage and a leading market position across North America. Our pipe and fitting plants and distribution centers are strategically located near areas of high growth demand. We also have an unparalleled base of satisfied repeat customers. A recent customer survey indicated that Westlake Pipe and Fittings was best in class with regards to customer service, sales experience and product offering. Our customers are saying that we are very easy to work with and we have great customer service. We do a great job servicing customers and we have the products that they need. And I quote quality service from beginning to end responds quickly with solutions to meet our needs. And this is from multiple municipal customers across the U.S.
We provide integrated solutions through best-in-class technology. We have a robust product development system focused on innovation, continuous improvement and automation. We have been granted over 3,030 patents in the last 10 years and we have a team of more than 40 degreed engineers which supports our innovation efforts. The picture to the right is actually a cell which assembles electrical boxes. It adds on the screws and the covers automatically. Westlake Pipe & Fittings is a technology leader across a wide array of end markets. We provide system solutions for our end markets and not just individual components. We develop innovative and integrated technologies such as PVCO, Certa-Lok and swing joints that deliver engineered solutions to solve customer challenges. We have a direct sales team with leading engineering and technical expertise that fosters strong, strong customer relationships.
Our specification and technical service engineer teams connect with municipalities and contractors to support specifications, consult on job designs and product installations. Just going to go through a few case studies. So this is a case study where PVC is used for new and replacement pipe installations. As you look at the picture, please ask yourself which pipe would you like your drinking water to come from? The rusted metal pipe to the left or the pristine PVC pipe to the right? The opportunity is that we know that installers have choices when selecting pipe materials. Actually there are four types of pipe. PVC, ductile iron, cast iron and concrete which make up 90% of the water mains in the U.S. and Canada. 29% of the installed pipe is PVC. It is the leading material and it continues to expand its market share.
As a solution, we promote PVC as a superior material choice for both new and replacement pipe. PVC pipe and fittings have a design life of over 100 years with the lowest failure rate among any alternative pipe materials. PVC pipes do not corrode or support growth of bacteria or biofilms and is completely inert. PVCO is 75% lighter than ductile iron. It is 60%-70% less expensive than ductile iron and has the most favorable life cycle cost. PVCO uses 40% less material compared to standard PVC pipe. The result is the market share of PVC has increased. PVC pipe as a percentage of installed pipes in the U.S. and Canada grew 7% from 2018 to 2023. PVC pipe has lower manufacturing, transportation and operating costs compared to metal pipe.
This is a case for PVCO pipe, a sustainable product that provides a strong competitive advantage in the market. Just as an example, the pipe to my left. This is standard PVC pipe and this is PVCO. They have the same outside diameter, but as you can appreciate, this one has significantly less material. So the opportunity is that customers want to achieve sustainability goals while ensuring return on investments. They want safe and durable materials that will perform and last. The solution is PVCO, a pipe which delivers water solutions with 40% less material, saving energy in both manufacturing and shipment. PVCO maintains the same performance standard as PVC pipe. It transmits 10% more water. It is three times more impact resistance compared to standard PVC pipe. PVCO is 75% lighter and 60%-70% less expensive than ductile iron.
It is 40% lighter than traditional PVC and has 10% increased flow versus traditional PVC. It is also preferred by installers. The result is that municipalities are starting to specify this product as their preferred water main solution. We also know that 84% of customers highlight Westlake Pipe and Fittings products as a key purchase driver. This positions Westlake as a trusted partner to meet product and corporate sustainability criteria. This next case study is one which discusses the Certa-Lok advantage, the benefit of a restrained joint pipe. There are samples of Certa-Lok in the room next door. Some of you may have seen it. Certa-Lok is a segmented restraint joint PVC solution for municipal, agricultural, well and electrical applications. The opportunity is that installers need solutions for challenging environments. For example, installing pipelines under rivers, airports and other critical infrastructure without disruption or providing temporary above ground water solutions.
In this case study Oklahoma City needed to urgently replace a damaged 18-inch steel water pipe that was on a bridge crossing. As you can appreciate, this is a situation that could affect the water supply to thousands of individuals. City engineers and the contractor reviewed different solutions based on lead time and ease of installation. Certa-Lok pipe was chosen and 600 ft of Certa-Lok pipe was installed in less than two days. Certa-Lok enables horizontal directional drilling and pipe bursting installations where you can drill a tunnel underground and pull assembled pipe through the tunnel, eliminating trenches. Certa-Lok Yelomine is manufactured with a proprietary PVC compound that is UV and impact resistant for above ground installation and temporary water bypass systems. This next slide indicates all our growth drivers and opportunities.
So clearly the baseline GDP growth is where we start from to which we add the housing and infrastructure product market growth driven by underbuilt housing and favorable demographics for housing demand. We also know that the infrastructure bill spent is required to address aging infrastructure replacement needs as well as growing agricultural irrigation demand and the electrification demand. In addition, we have also our own organic share growth which is based on PVC pipe taking market share due to positive technical and life cycle cost benefits. Innovative product offerings such as PVCO and Certa-Lok in our broad and well positioned geographic footprint for pipe fittings in our integrated solutions are adding value to customers. As a reminder we have a 4%-6% organic growth target. We also look at inorganic growth opportunities which are based on our proven track record of accretive acquisitions and successful integrations.
Our sales and distribution platform is already in place to support growth, and we have an opportunistic mindset and a return-on-invested-capital-driven culture and track record. So, in summary, we are one of the nation's largest providers of PVC-based water management solutions with robust long-term demand trends for clean, fresh drinking water and waste- and storm-water solutions for both new construction and replacement. We provide highly innovative products and integrated solutions including PVC pipe and fittings that are lightweight, more sustainable alternatives. In a recent customer survey shows that we have high-quality service and distribution that ensures prompt and reliable delivery across our footprint. My final comment is that PVC offers technical and value advantages over alternate materials leading to pipe market share gains through ongoing investment to replace aging infrastructure. Thank you for your attention.
I will now transition to Renee Havrilla who will cover Westlake Global Compounds.
Thank you Andrew. Good morning. My name is Renee Havrilla and I'm the Vice President of our Global Compounds business and I've been in the chemical and building products space for 34 years now and 11 years with Westlake Corporation. I previously worked at Bayer MaterialScience, now known as Covestro to many of you. So I've been leading Westlake's global compound business for just over 6 years. And we are one of the largest global, global PVC compounders and we sell into many markets, as you're going to hear today. You already saw PVC is a very versatile product. And there are many ways that we can customize our compounds for all these different market applications. And you may not know this, but PVC resin that Westlake produces today, not only here in the United States, but also in Europe and in China, you cannot process PVC.
The resin itself, you have to compound it. And by compounding it with a lot of different additives, you are therefore able to make all these different applications that you sell today. So in our business, we are using hundreds of different additives to make these beautiful products and for our customers to be able to produce these type of products as well. So throughout today's presentation, I'm going to be focusing on a few key messages, see if we can get this to work. So as we build our brand, which is Westlake Global Compounds, we're known for having that passion, just working with every customer individually, listening to them and customizing what they need. And this might be for their application for the processing requirements that they have in their given plant environment, as well as looking at innovative technology that we're developing.
What's most important is product quality, our quality management systems, and also our operating excellence. And so this is what delivers what we call the stickiness with our customers. And, this is how we are able to successfully grow organically. And so we're delivering solutions that are aligned to the strong tailwinds. You just heard about them today from Bob and Andre and Scott. And there's attractive growth in many of these industries and also to sustain our planet. And so this drives us to be the leading integrated PVC compounding company. And our local teams provide a lot of expertise wherever we are in the world. And we have that global footprint as well, that we can expand geographically into many different market segments. And of course, we have the financial resources of Westlake that helps provide this value to our customers.
And now with our creativity, we're growing into the retail and consumer product products applications as well. As you heard, we're innovating new ways to incorporate recycled plastics. And as an example, with our Dimex products, some of these have upwards of 97% recycled content. I'm also going to round out today and talk a little bit about customer experience. It's very important for us and we're going to share some of our investments that we're doing to help increase customer satisfaction. And a lot of this is with new digital solutions. It helps us improve our time to market as we're developing these highly customized solutions. And it's also helping us create more stickiness with our customers through our advancements. So now I'm gonna take a look at our compounds at a glance. And as you can see, we're serving 60 countries today.
We have over 1,150 customers and we have 14 manufacturing sites around the globe and we've got 1,100 employees supporting us. We formulate all types of products so they can be flexible like you saw in wire and cable, all the way to rigid PVC applications. A lot of those applications you saw today, but also in industrial products, in consumer goods, in the automotive space, in the interior of a car, as well as healthcare, in our medical devices. Our vertical integration with Westlake allows us to develop these new PVC compounds while having access to a lot of innovation of course, and the resources of Westlake. We have a dedicated research and development team and we partner with our customers to really co develop what they need and that tailored solution and this helps advance their success as well.
And in addition, we provide to our customers, and we also utilize this internally, very sophisticated analytical services with our research and innovation group that we have in France. So with the ever changing dynamics in the global market today, supply chain excellence is critical. We're buying hundreds of different products all across the globe and the procurement of these materials is important so that we are able to be reliable and consistently supply all of our customers around the world. And this is only possible with our very experienced, high performing management team. So as I mentioned, our offerings are aligned to many of the strong tailwinds of our industry and megatrends.
You heard today the expected long-term growth in housing and, in addition, electrification, broadband connectivity. All of these are challenging us to innovate these solutions to have a more extensive product portfolio and specifications in a highly regulated market. The growth rate, as you can see, is about 4%-6%. Now today in the U.S. market, that addressable market is about $3.2 billion. The following compound market segments are quite significant in size. So if you can imagine wiring cable in all the buildings utilizing PVC for the jacketing and the insulation of copper wire, also you saw all those fittings for pipe that are required to connect for all the growth in water infrastructure and in irrigation poles, setting, et cetera. Then in our healthcare applications. Think about that megatrend.
We have an aging population and also we're using more advanced devices, medical devices, using PVC in underdeveloped countries as well. And so for all of these, our customers are depending on us. And their compound purchases, like I said, are very tailored and they have very specific parameters and many regulatory requirements that I'll share with you. And so customers across the world are requesting sustainable solutions. We are not driving this ourselves, it's coming at their request. And we are doing this in many segments of our business. And I'm going to just use an example of automotive. What we're hearing today is it's going to be a requirement to do business in automotive. You must bring a sustainable solution to them. So now we have a variety of solutions for that, including mechanical recycling which you heard about today where we can recycle single use plastics.
We can also take in any post-industrial waste and we're able to make retail products that you could buy today at Home Depot or Amazon. So let me show you a quick example. This is our No-Dig product that you can again buy at Lowe's, Home Depot or even online on Amazon. And this is made with 97% recycled materials. We also are formulating, excuse me, other compounds made with bio content. So some of you might be familiar. Westlake in our European operation produces GreenVin PVC which is bio-attributed and bio-based PVC polymer for us to use in our formulations and also add other bio-attributed and bio-based additives to bring a full solution to our customers. And I want to give you an example of this.
Out of our location in Vietnam, we're heavily focused in the shoe sole industry with our PVC compounds. Here we had a major global player come to us and ask us for a bio-based solution. We were able to develop with the bio-based PVC and bio-based additives this solution that we're selling to them today. The history of our business is based upon our scale and this is to support, like I said, the variety of the markets that continue to grow. Westlake started in the PVC compounds business, as you heard from Albert today, with the acquisition of Axiall. Actually we have one of the largest PVC compounding facilities today in Hazlehurst, Mississippi due to this acquisition of Axiall. In 2019 it was an exciting time for us to expand globally.
And now we have locations in Europe, in Asia and in Mexico. And this is getting us into a lot of new market segments like consumer goods that you'll hear about our automotive business as well as our health care segments. And this also brought a tremendous amount of expertise of Nakan. So to assist us in our sustainability goals in mechanical recycling, as we discussed for our customers and also for Westlake overall, we acquired Dimex in 2021. And here we produce our branded compounds called Pivotal, which contain recycled content, as well as those outdoor living products and other products that I'll share with you later. And then you can see in 2023 and 2024. This is all of our organic expansion and this is really all aligned to those tailwinds that you heard about.
So for example, in North America we just added another production line in our Mississippi plant for building and construction. This is going into a lot of the building products that you heard Scott speak about today. Also with the aging population, we talked about the healthcare megatrend. We put a plant in Matamoros, Mexico now to service the North America medical device market. And now we recently are just starting up two new plants, one in China and one in Vietnam. And we're transferring our technology to these plants. And this will allow us to successfully grow, of course, with a lot of our global key accounts and tier 1s that want us to be locally present. And it's in one of the most dynamic regions, of course, of growth, with an estimated 60% of the total global growth.
So as I mentioned, we are successful with our local teams, very highly skilled research and processing background, and we have over 100 patents of our innovations. So something that's very important to us is our Vitality Index. So we track our performance to deliver new solutions that are less than three years old. And our target is 30%. And as you can see in the chart, we come very close to exceeding or just reaching that target each year. Because our value proposition to our customers is all about customization. We have to bring these new products or colors or additives that help us achieve this KPI. And it's critical to our long-term success as well. Also important to us is to supply strategic partnerships. So we work with many global customers, OEMs, tier ones.
And so therefore, especially in the automotive and the medical device market, this is very important to our success and to sustain this. It's really about our people. They are highly motivated, very collaborative, and we have very productive teams that are focused on all of these new and current customers to meet not only the product requirements, but also their processing requirements. Because many PVC plants are very different, and also we continue to look at those new innovations and these strategic developments. So on the right side of this slide you can see diverse product offerings that we're making with thousands of formulations in many of these segments. And each segment has very unique requirements. So in building products, you saw it today with the tailored manufacturing, the colors parameters to help them improve their efficiency, their scrap rates and their first pass yields.
So we'll have many versions of a very similar product that is tailored just to an individual plant. And this is where we're able to really help our customers and bring more value within the consumer goods space. You can see there are many applications of PVC you maybe didn't even were aware about. But it's a great polymer, it's very versatile and we can formulate to meet many unique applications. So just to name a few, I mentioned footwear in Vietnam. Not only have we developed the bio-based solutions, we're also innovating new colors like glow-in-the-dark for children's shoes. And in addition, with our vinyl records business, we work closely with our PVC company in Germany that produces the specialty PVCs needed to get that excellent sound quality.
We make over 20 different colors supporting the market, which is growing now and has surpassed CDs of course. One of the colors we recently developed was just for Taylor Swift. So electrification, again, it requires extreme lot to lot consistency. They're building many reels and reels of wire. So this is very important. But even more important is UL. And this is the regulated body that looks at certifying not only our compounds to ensure the validation, the testing, they have to validate all the manufacturing plants that we produce these compounds in. They also have to validate our customers and their assemblies, their tools, their equipment. And again, this is all about product safety. And so in a highly regulated market like this, it's very challenging. And we have to work very closely not only with our customers, but also with our suppliers.
And then finally there's the healthcare segment. This has very stringent quality management systems as you can imagine, all those disposable medical devices that they're using in hospitals today. So very intense risk management is involved with our teams. And here these projects are very long term, long term to develop. But more importantly, some of these projects are 20 years going, they're working very well. And so it's a very nice business for us to continue to grow. And speaking of growth, here is our current geographical footprint. And really our success is because of this global reach. And you can see the map of all of our sales locations, our laboratories and manufacturing locations all around the world.
I want to point out where I feel we are very unique is we do not run our business at the entity level out of France or just out of China. We run our global business based on the market segment. We have centers of excellence around the world that focus on certain segments. As you heard Albert talked about Italy, this is where we have a very good strong market share in our healthcare business for the European market. Now we're expanding that, as I mentioned, in Mexico and we currently have those assets in Vietnam. We have that consistency no matter what region of the world that we're supplying into. In addition, our regional customers benefit of course from all the technology that we're developing globally.
So I mentioned the UL products in the United States and I want to give you an example of what we did when we acquired Nakan. So they were not making UL products. And today we are now approved in Germany and in Spain and we're under development and getting approvals done in Vietnam and also in our France plant. And so by helping them work with UL, transferring our technology, we now have these approvals in place and it's helping us grow further because in certain markets UL rated products are needed such as Latin America or South America or or into Southeast Asia now as materials are being produced and require this regulation.
And then finally, just to note, besides our technical laboratories which are actually located at every manufacturing site that's supporting all the new business and our customers, they also help our internal manufacturing processes to really make sure that these compounds are produced with the highest quality and performance. But we also have a research and innovation centers that's looking on the projects of the future, supporting all the market segments that we supply today. And these are located in France, in Spain and in China. So I mentioned in the last slide, it's really our global reach is how we are differentiating ourselves from our competitors along with all of these customer driven solutions. And we also use global distribution partners that are extension of our sales force. They're out gaining new business, we're developing new solutions for them.
This is also providing us warehousing and logistics across the world. And not only do we have the global footprint with our customers, but we have our procurement teams working globally, working with many suppliers for the additives that we require. And our customers trust that we're going to consistently meet their requirements by having these relationships. And certainly we benefit from the reliable, the consistent quality and the access to this wide range of suppliers. Our technical teams not only are developing new products, but they're highly dedicated to ensuring that we've got multiple approved suppliers and we're working with our customers on these for their pre approvals so that we are always able to supply competitive priced compounds as well as having that continuity. So as one of the largest global PVC compounders, we enjoy the vertical integration of Westlake.
We utilize PVC being produced in the United States, in Europe and in China. We're utilizing many different grades of PVC that they produce today for the variety of the applications, as you can see. As mentioned, our customers are driving sustainability in our business and we're always developing solutions for them to help them achieve their sustainability targets. A predominant requirement that we have in this segment of automotive and healthcare especially is EcoVadis. It really started in these segments and these are ratings that we've been able to achieve. Now we're working on a global Westlake Global Compounds rating for our business. Then also mentioned from a sustainability perspective, we have our new Pivotal recycled compounds and these also can be utilized not only with PVC-based materials, but also polyethylene business that we'll get into in a moment.
We also of course have our bio-based materials as well. I want to share with you one example of a sustainability project that we started working out of France with our research and innovation. We've been able to take scrap instrument panel skins from our tier ones that are processing these beautiful interiors that you see today. We are able to take that source scrap and we've been able to extract the plasticizer right out of those scrap materials utilizing a process that we are able to recover the plasticizers, the virgin plasticizers that we're putting in and we're able to reincorporate them right back into the instrument panel skin compound. We've been able to prove with our customer that they are able to process these just like our virgin resins.
Most importantly, they're meeting the aesthetics and the soft touch that you want in an instrument panel. They're passing all the airbag testing that is required as well. So we look forward to bringing more solutions like this with our research and innovation. Then with our Dimex business. We have many wiring cable customers across the United States and now we're purchasing back their recycled or their industrial waste and we're able now to incorporate that into that edge product that I just showed you. So it's that reassurance that that material is not ending up in landfill. It's actually going into products that are sold today. So this page here summarizes our technology leadership in these specialty markets. As I mentioned, that's really our key differentiator in our business.
Whereas our smaller regional players across the world are more at a disadvantage, of course. And again, this is all possible because of our very experienced, high performing team. And starting with Axiall, we had highly specialized products, especially in the wire and cable space, in the fitting space, and a lot of the building product space. And we've got high volume assets to be able to support that growth. Then when we acquired Nakan, we have these unique product specifications that have access to markets that we would have been very challenged to develop organically. So this acquisition allowed us to match technology with these strong relationships at the OEMs of medical as well as automotive and the tier 1s. And they trust us us to produce these very highly regulated products.
Today we have combined now these two businesses as one business to focus on all the attractive growth and profitable markets today. I have a few case studies to share with you as well. In the first one, I'm going to talk more about specialized products. Many of you are probably aware that artificial leather is made with PVC. In our plants in France we have developed a new Calligram coated textile. It is produced in sheets and you can not only mold in the color, but you can also mold in any type of embossing for a brand. And this creates anti-counterfeiting capability of this leather, of this artificial leather. And with that we are starting to work with luxury brands like handbags to produce very beautiful and of course with these very good brands.
In this case we can also use computer ink as well on these sheets which has very good abrasion resistance. You're able to produce just one unique sheet, say of your favorite NFL brand. If you want a luxury bag demonstrating this. Then we're also promoting this at the automotive interior tier ones as they are the ones designing future cockpits of the future. Here we can use these Calligram sheets with different molded layering to show back lighting as you would see in a headrest today of OEM's emblem, or even very decorative stitching and printing that would be on the instrument panel as well. So as I mentioned as well with our vertical integration, we have Ventilate to provide our GreenVin bio-attributed and bio-based PVC resins. So we're continuing to help with those sustainability goals.
And as I mentioned, in automotive this is a requirement for us as we have to have that proven technology and also with our building and construction and our global customers, this is we're also working with them on their sustainability goals. As I also mentioned, we also have our Pivotal products where any global customer can rest assured that if we receive their scrap that we are going to put it into one of our compounds going into one of our products. It could be used in electrical box applications or like I showed you, the Dimex products in a variety of commercial and residential applications. So we're here to meet their technical challenges and we can deliver these to our customer. And so here you can see just expanding a bit on Pivotal and Dimex overall.
As mentioned, Westlake acquired the company in 2021 and Dimex is here to eliminate plastic waste and support our customers and even non customers with a solution for their scrap. Dimex has over 30 years of experience this and they are located in Ohio. As I mentioned before, not only do they procure PIR or post consumer waste of PVC, but also TPES, TPVs, other polyethylene, so many polymers and they have the capability to bring this in, to sort it, to grind it and be able to compound it in very unique ways. To sell the compounds as Pivotal or even to sell those final products, we submit all of our recycled products to Green Circle. We want to obtain that certification for the recycled content. This is a trusted mark in the industry.
And our pivotal compounds today, when we apply for these, we also know that they consume less resource and that are going into the final products as well. And so like the edging picture you see, that's our no dig product that you can purchase at big box retailers. Also at Amazon we also have other applications like pavers, dock edging, home office, commercial matting. So many applications for these recycled materials. And as one of the largest plastic recyclers in the United States today, we make over 600 products made from all recycled plastic. And we have the capability to process 100 million pounds of plastics annually. And these are typically providing a cost savings somewhere between 15%-20% versus producing these products with prime resin. And then finally for my last case study, I want to share a different approach to mechanical recycling.
So a concept that started in Belgium and is also right now in eastern Canada was to work with hospitals how to recycle hospital medical waste. Today mainstream recyclers of plastics do not handle all the global plastic medical waste that's being generated today. Keep in mind, recall that plastics are growing in this segment, again, due to that aging population and also the geographical expansion of highly regulated products across the world. We estimate this to be about 7% per year. So we reached out to a local predominant hospital system in the Houston area, and we wanted to work with them to collect and sort of their disposable medical devices. This includes PVC tubes, PVC masks, and the PVC saline bags that are all used in emergency rooms across the world today.
So we will collect from the hospital, and we are going to use these to create our Pivotal compounds. And we can produce our home and office and other matting applications using. If you go next door, you can see one of the clear mats that we can make with this clear tubing, masks, and the saline bags. So the hospital team is very supportive of the concept, like we've already seen in Europe and Canada. And their employees actually expressed a really strong desire to have a way for all of this clear plastic waste to be recycled into final products and know that it's not ending up in landfill. And again, these products are widely available Amazon and other major retailers. So for the hospitals, we're helping them with their sustainability targets as well.
So we look forward to continually expand upon the success at this first Houston hospital and bring this across the rest of the U.S. as well. So one back. There we go. You might have saw in a few pages back our customer quotations. What's very important for us to continually focus on is improving the customer experience. I want to highlight two of these digital solutions that we are incorporating today. One is with artificial intelligence, generating product innovation, and also our sales portal, which helps us service our customers and also create that stickiness that we talked about. First I want to talk about artificial intelligence. Just imagine how many laboratories we have across the world that are creating thousands of formulations.
Now we have one digital collected database, not only with all the formulas, but with all of the performance characteristics of these formulas. It's all located now in the cloud platform. So by applying AI now, we are able to create highly predictive formulations. This is helping us reduce the time to bring a solution to a customer. Also it's expensive to evaluate all these options as well. So it's reducing our costs to evaluate them. Also our goal is to first bring a solution at least 20% faster to market with this new capability. Our chemists and our research scientists are able to design experiments now by reducing iterations. It's not a trial and error.
We're able to now meet customer challenges of course, in a more expedited way so that they can sample and eventually approve and then we'll start our commercial shipments for their application. In the compounds industry we believe in the PVC compounding industry, we believe we are the first to bring out a sales portal here in North America. We now have the ability for our customers to go out 24/7 and have access to enter, track their orders and also do many self-service events. They can also get regulatory requests and forms, whatever they need to service their business and they can do this on their phone or computer. Now of course we have our sales team and we also have our customer service always on call as well to support them. But again, it's another way to create that stickiness with our customer.
So today we have 30% of our customers using the portal. Today, however, we just started the order tracking so we anticipate the usage will continue to grow because now with this order tracking they can actually watch the truck just as you can do today with a FedEx or a UPS order for a typical purchase on your phone. So how do we continue to grow at this market rate? Well, you heard today a lot from Andre and from Scott and from Bob about the benefits of all the tailwinds of underbuilt housing, electrification, growing medical needs. We've got wiring cable going into EVs of automotive now. Much more wiring cable is now required for these automobiles as well as improving connectivity across the globe. So with our global reach we will enjoy the expansion as well as developing countries. We have a dedicated R and D group.
We have over 20 PhDs working with us today on these new innovations and again they're all being driven by market trends and customer requests. We are proud to continue to maintain or exceed our 30% vitality index. Thank you for your time today. We are excited about the growth opportunities and the focus of our market positions. With our compounds we have a very strong portfolio of products and we continue to develop these, as I mentioned, with our very knowledgeable teams and looking for new innovations, especially new market opportunities on a continuous basis basis. We have our global presence and we continue to expand around the world to grow faster than the market.
Our team is very passionate for our customers and we hold a high standard in our development, our operations, our sales support, our customer experience and just ensuring customer success and we are reliable. Due to that vast global supplier network that we've built and this is all through a dedicated global procurement team, we are able to improve our time to develop customer solutions. Now with our digital solutions on these new developments as we use AI tools. And finally with our vertical integration and with Dimex, we're also able to support our customer sustainability goals of the future. So we have the capability of course to do bolt-on acquisitions with adjacent products, additional geographies and also our organic growth. And most of my focus today was on the organic growth.
But we of course continue to identify and engage in these inorganic opportunities to complement other polymers and to expand. As Westlake has the proven track record for successful integrations and return on investment driven culture. So my team, we challenge each other to identify these innovations, the game changers with PVC compounds, you got to see today how versatile of a material it really is. And with our digital solutions to again improve and be best in class in the global market. So thank you today and now I'm going to introduce Steve Bender, our CFO of Westlake Corporation. Thank you.
Well, thank you very much Renee. I really appreciate that opportunity. And I'm Steve Bender, I'm the Executive Vice President and Chief Financial Officer. Been with Westlake 19 years and in the industry over 40. So today the team has given you a much deeper dive into the fundamentals of the strengths of Westlake and certainly a much deeper dive into the HIP business. Proud of the performance and the confidence and the opportunities that also lie ahead. As you can see on this slide here that you know, the HIP business continues to be a significant contributor to the overall Westlake business, representing about a third of our sales on an LTM basis and certainly compelling returns that you see and strong EBITDA margins. In addition, Westlake's strong cash flow generation, our strong balance sheet offers incremental opportunities to really grow the business of HIP.
The continued combined strengths that we see within HIP and the building products business between HIP and the chemical business of PEM sustain and expand our track record of value creation and the strong performance that we've delivered. They're supported by these four pillars that you see here on the slide. The HIP and PEM combination provides more stability in total earnings and cash flows. HIP cycles are largely uncorrelated with those in PEM, which reduces overall earnings volatility. In addition, HIP is certainly less capital intensive than PEM, which brings lower cyclicality and enhances our return on assets and return on capital employed. The Westlake balance sheet strength provides additional opportunities to continue to invest in M and A opportunities as we see those arise and we'll certainly continue to pursue those.
Westlake's scale and expertise in material science, and Renee did a great job in talking about that, supports the operational excellence and the culture of continuous innovation and the large and global marketplace that we see for our products. Create opportunities, continue to grow our M&A skills and apply those and create opportunities with compelling returns that extend the strong foundation that we have. We entered the housing and infrastructure space because we believe the applications of Westlake's strengths in these large markets and the long-term fundamental strengths that you heard Bob and others speak to provide a powerful recipe for value creation. We've not been disappointed. We've continued to expand the margin of this business and we've steadily grown both organically and inorganically.
We're proud of the progress we've made and continue to expand this business and we expect to do so over the coming years. As you see that we've done over the last five years. We're really just getting started. You know, despite the challenges in housing affordability that you heard much about, our hip business is performing incredibly very well. And as a result, we're revising our guidance that we've been providing. Our guidance now for the full year of 2024 is $4.3 billion-$4.6 billion of revenue, up solidly from the prior guidance we been guiding.
In addition, we're now estimating that our full-year EBITDA margin will be trending more toward 22% from the 20% that we've also been discussing as we see very strong backlog that you heard discussed, continued market penetration, strong synergy capture from the acquisitions that we've completed and the automation efficiencies that we see that are driving bottom-line results. We're very pleased with the progress that we've seen and really encouraged by the continued demand picture that we see out there in the marketplace. First off, let me kind of re-emphasize the confidence we see in the long-term demand picture. Our overall housing underbuild that Bob and others spoke to that goes back all the way to the financial crisis going back 15 or more years and the intersection of the population demographics provide strong foundations for the supply and demand dynamics.
More immediately, we see strong demand in the pipe and fittings business that Andre spoke to that are positive indicators for new residential construction. Also, very importantly, we're pleased with the leading positions that we have in the product categories in the key markets and the cross selling that you heard discussed today that allow us to drive sales at a rate greater than market growth. And while our strong cash flow generation and the balance sheet provides us opportunities to continue to grow through M and A looking for opportunities, we're very confident in our existing footprint of PEM and HIP, but we also see great opportunities to continue to drive this business further. Our approach has really been to be very structured in continuing growing the business. Our acquisition approach is driven by a focus on high returns and capital.
Today we have a very wide set of potential opportunities to expand across both the HIP business and the PEM business. But M&A is an important piece of the business, but really just a piece of the business. We have a long history of operational excellence across a vertically integrated business that provides us a global footprint and a low cost advantage position. We also have a strong brand recognition in our portfolio with a very resilient business. We've continued to add to the business as you've seen today, and really will continue to do so over time through organic growth and inorganic growth. The results of this formula have been sector-leading value creation. The results that you see here really confirm the effectiveness of the strategy we've talked about all morning long.
Whether you're measuring growth in sales, EBITDA or free cash flow, comparing profitability metrics or gauging return on assets or capital employed, you can see Westlake's financial outcomes really are a standout compared to our chemical peers or building product peers. Ultimately of course, leadership in growth, profitability and capital efficiency result in shareholder leadership in returns. Westlake is well positioned to continue to provide strong returns to our shareholders. Zeroing in specifically on the HIP segment, we've seen solid revenue growth with solid margin performance over the past three years. We continue to see these results continue to grow. We're only beginning to scratch the surface of what we can do as our portfolio continues to mature and we see the backdrop in demand continue to normalize. So as we think about.
Let me just go back one slide.
There we go. So as we.
Sorry.
So as we think about the balance sheet structure that we have here, we continue to really have strong continuing results. We've delivered exceptional results. As you can see, maintaining a very strong balance sheet which gives us considerable optionality to continue to grow both organically and inorganically. Our low debt to EBITDA ratio, our long dated maturity debt profile and the very strong liquidity provide us significant competitive advantages compared to our chemical or building products peers. As proud as we are of our successes, we're equally confident in our ability to grow meaningfully over the coming years with returns in the future. Organic growth formula is supported by that broad portfolio that you heard much discussed today from a cost leading position in HIP.
Our growing market share through these consistent relationships and growing relationships that you heard discussed with our distributors and with the home builders are really the foundation for that. We're building on that strong foundation with new investments and new capabilities. And as you can see from that formula, we expect to continue that growth in that 5%-7% as we expect to outperform the markets. I foresee Westlake continuing to add to the baseline of our business by inorganic growth as we deploy capital into this market through mergers and acquisition opportunities, enabling a robust cash flow using our strong balance sheet. So let me just summarize here by saying that the business of HIP is complemented by our PEM segment. The combined portfolio provides enhanced opportunity to continue to grow with standout returns.
The HIP business is composed, as you can see, of these three very robust segments. The one, the Westlake Royal Building Products business, the Westlake Pipe and Fittings business and the Westlake Compounds business that all founded with durable long-term demand growth. HIP business is incredibly well positioned to grow well above market growth. The inorganic growth opportunities really are there and we see these as strong opportunities. Finally, that form of success that I talked about is supported and steered by an experienced leadership team with a solid track record of value creation and long-term success. I hope this session really has helped you really have a better and deeper appreciation of our housing infrastructure products business. You have a better understanding of the various components that make that business get delivered each and every day.
Thank you for your time today, and what I'd like to do is bring the speakers up to the podium, and we'll certainly take some questions from the audience.
Okay, so as we get assembled here with bringing the presenters back up, we'll take questions obviously from the room as.
Well, as for those on our webcasts.
We'll have 2 microphones roaming the room. So, obviously, raise your hands as you're doing now, when the microphone will find you. Let us know your name and ask your question. Let us get assembled.
Once we get assembled here, we'll take the first question. Okay, I think we're ready.
So go ahead, Dave. I guess, Chip, do we have microphones for the audience? Okay, just make sure that we have the mics on there.
Number one, I can't hear it.
Can you hear me?
Turn it on. Number one.
Can you hear me now?
He's coming.
Thank you. Dave Begley, Deutsche Bank. Albert, on your revised 2024 EBITDA guidance, what's the potential to exceed that 20% top threshold this year and beyond?
One thing that we are not, not certain of is the direction of the Fed interest rate. People talking about beginning of the year was 6 rate cuts and then 3 and then 0 and maybe -1 and now maybe 1 or 2. So I think interest rate does have a a large impact on demand for housing and housing product in the U.S. and also globally. U.S. interest rate does affect the global central bank's view of things. So if interest rate goes down faster, more this year, next year we will see more benefit for building material business and for our PEM business as well. So that's the unknown we don't know. I think this is what we are giving you. A projection is our best view today without much of a Fed cutting rate this year.
This is Charlie Rose.
The question I have for Steve and for Albert.
You've done a fabulous job of repositioning.
The company for a new era of housing-related activity. I'm wondering what your thoughts are of housing this. How do you translate that into a.
Valuation in the company?
Does it come from either exiting the?
Historical PEM business or does it come from separating the company or does it come from other actions you think are?
Strategically relevant to a value creation strategy? Because now of the $2.3 billion of EBITDA, almost $1 billion is coming from.
This HIP business and this HIP business.
Has more, I'm going to use a polite word, creativity than making polyethylene.
I'm wondering what your thoughts are.
On the value creation shareholder equation that you're thinking about.
So let me just start by saying first of all, the first thing to do is really have everybody understand what makes this business. So when you think about the presentations we've had today, it's really designed to really give a much clearer picture of what this business is all about. So we've only owned the business over the course of the last in its current configuration for about two years. So part of this is really just trying to reveal that business for its component parts, the growth drivers that make up this business and getting an understanding of the leadership and how we're driving this business forward. So as we think about that, as we think about the ability to have more transparency, the issue is also can we get some of that improved value from for the recognition of the growth and the value of the business.
If over time we can't find a way to do that, we can think of other structural solutions that might provide better transparency and therefore better value.
Okay, thank you.
Keith Hughes, Truist.
I want to go back to the.
Guidance raise, specifically the revenue raise. Could you just talk more about what products are doing better than you thought? And what's contributed to the revenue increase?
Yeah, you're actually seeing growth really across all three of these strategic business units. You're really seeing this and you've seen this in the commentary even from some of our large customers, distributors and ultimately going into the home builders. And of course that is driving our pipe and fittings demand. Certainly it's driving some of the exterior businesses in our Westlake Royal business. But it's also driving Renee's business really in the compound, especially in wiring, cabling business. So you're really seeing that pull across all three of those. As we see the drive in the pull on construction activity, it is increased units. We are seeing a growth in demand. And Scott, you may want to speak to some of the commentary that we've heard from some of those builders. Yeah.
Coming into the last fall we expected this year with the interest rate headwinds to be a slower build year. We really did. But if you look at what the large builders are saying, the D.R. Hortons, the Lennars, companies like that, they're all getting bullish. They're all adding to their forecast, they're all increasing. So what we've experienced in my segment is a little bit of an unexpected strength in new home construction. We're seeing it advance more than we had expected coming into the year and it's leading to more units, as Steve indicated, being sold this year.
Just want to add that as you know we think we are in the bottom of the cycle for the PEM business. We are seeing price increases for many products around the world. So as the economy recovers, I think that will help a lot of PEM business. But on the HIP side, our first quarter volume improved 12% over the previous quarter in the first quarter of this year, which is supposed to be a weak quarter seasonally. So even though we have high interest rate because of our relationship and with the big home builders, even at high interest rate, low new home construction market condition, we're able to grow our volume. So as we said earlier, one of the earlier question is if truly interest rate reduces, I think pent up demand as you heard this morning, will really drive additional volume and additional margins.
We are trying to reduce our cost through automations and AI and everything else that we hope we can improve our margin as well as increase our volumes.
Hi, good morning. Jeffrey Zekauskas from J.P. Morgan. When you look at the 7 or.
$800 million in EBIT in HIP.
In rough terms, how much of that comes from PVC? It's a three part question. How much of that comes from PVC roughly? Are the PVC, is the PVC margin.
Higher than the average margin of HIP.
In general right now? And then thirdly, with, with HIP, if you broke it up into, I don't know, PVC, stone, metal, fittings, and you looked at the $700 million or $800 million in EBITDA, how would you divide it up into where the returns come from, the different materials you make? Thank you.
Yes. Excuse me. So, Jeff, when you think about the contribution we're seeing really in the resin coming over into the building products, of course it's being transferred over at market prices. Right. And so as you think about that, we're able to then transfer that value and we've seen the big value that we've been able to create. Given the changes in business cycle over the course of the last several years, as you've seen prices continue to come down in many of our chemical products, you've actually been able to maintain good stability in earnings across into our building products business. So the key at the end of the day is the ability to maintain less cyclicality in the combined businesses. So. So you're right. It's an integrated business that provides that real value.
Now I know I didn't get to some of the other components of your question, so maybe you didn't get to.
Any of the components just yet.
To be clear, I'm going to have you kind of go back through some of those.
Yes, please. Okay, so to restate it, how much in rough terms of the HIP, EBIT is PVC? Why don't we start with that one?
Yeah, so a good portion of our building product certainly goes into the pipe and fittings business and the siding and trim. And so if you think about our call we had in the first quarter, a good compelling number was the numbers we called out in our call calling out siding and trim contributions and those in pipe and fittings. So really strong contributions. We didn't call out specific components of EBITDA or EBIT as it relates to HIP, but I did call out specifically the bigger contributions which are coming from the siding, trim and the pipe and fittings business.
Okay, is the PVC margin that you make from the PVC in the HIP business higher or lower than the average margin of the HIP business?
Oh, I'd say it's certainly. You saw, in the margin we saw in HIP business, it was a 25% margin in the first quarter. So still strong compelling margin within that business in vinyl resin if you will. But nevertheless even more compelling margin within the overall HIP business.
I'm sorry, so it's higher or lower?
Higher, higher.
And then in general, when you look at the materials in HIP, you know, how do you think about that $700 million or $800 million that you make? You know, how do you allocate it across the materials you sell in very rough terms?
Well, I think, you know, clearly we see very strong results really in all three of these. But I would say we continue to see very strong contributions from Andre's pipe and fittings business, which continues to perform very well. I'd say that a good portion of our business really continues to see strong results in the siding and trim business, in Scott's business as well. And I think a nice contribution still coming from Renee's business in the compound side of the business. But the biggest contributions are still really being driven by that business in the pipes and fittings business.
Okay, so I guess before I give it up, when you transfer your PVC from the PEM business, is it one price that gets transferred across all—all the PVC?
Yes, it's one. So again, remember Jeff, that when we're selling resin into the market, we're selling between 20%-30% of our production into the building products business. So we're selling, also selling some of that PVC resin into the export markets. The rest of that is also sold directly to our competitors who are making other applications such as sidings, such as fittings, such as pipe and other applications. So I've got to be very transparent with those other customers with their resin prices of those received by our team up here.
The price that you sell to your third party customers in PEM is the price at which you transfer to HIP. Is that fair?
Yeah. The price I'm selling externally, externally, domestically, is the same price I'm selling to my team domestically here for their applications.
Thank you very much.
You're welcome.
Excuse me.
Kevin McCarthy with Vertical Research Partners.
Appreciate the teach in today. Very, very helpful to run through the HIP portfolio.
We didn't spend a lot of time on strategy.
I was wondering if you could speak to what you view as the two or three most important elements?
Of the HIP strategy to grow the business, let's say over the next 5-10 years.
How important do you think inorganic?
Growth would be over that time frame, you know, versus the organic growth profiles that you laid out for each of the individual businesses?
And then, the risk of asking too many questions. I am curious about the integration.
You made the point a few times.
That you're gaining market share and growing with your customers who themselves are growing at a premium pace. And so related to that, is your level of PVC integration also growing? And if so, what does that mean for how you manage your PVC business over time?
You know, a lot of questions, but what I may do is have Albert start and then have Bob add to this in terms of strategy.
I'll let Bob talk about the HIP strategy first.
Okay. We, you know, we're always looking. First of all, it's about growth, profitable growth. I mean that's key driver for us and that's been behind the past acquisitions and it's also behind the organic growth that we do. So we're very driven by return on the capital employed and our return on the assets. And then so that's kind of the driver. And we look at a lot of different variables for our growth. You know, the first thing we look at is bolt-ons to our existing capacity for organic growth. That's easy. And those usually have excellent payouts. So adding equipment and production capability at existing sites is preferred and usually lower CapEx than like setting up a brand new facility from scratch. The other thing we look at is the integration to our other businesses. And of course, you know, how does this grow?
What's the unique technology component that it might have? How do we integrate it? How do we manage it better than a current owner? These are some of the questions we ask ourselves in our inorganic growth.
Maybe I'll pause there.
Kevin, back to your question about further integration of the business. As you could hear from all the comments from the speakers today, we're continuing to add capacity to meet customer needs. That integration of that resin into our pipe and fittings into the siding trim and other applications are continuing to grow as we grow our downstream building products businesses.
Okay, Jim, maybe this second row here on the right.
Good morning. Mike Sisson, Wells Fargo.
Albert, when you, you guys had a.
Couple nice, you know, nice house and.
All the different product lines.
Where are.
there some holes in the portfolio?
Do you have some number 2, number?
Three positions that you could do some.
Acquisitions and really build upon the portfolio down the road? Well, the residential housing market in the U.S. is about $800-$900 billion a year business, one of the key drivers of the U.S. economy. You saw that our HIP business, which includes housing and infrastructure, is only $4.2 billion a year. So we are just a drop in the bucket. You saw the picture of components in the house. We're not everywhere in the house, but we don't have to be, I think. Just to paraphrase what Steve and Bob mentioned, certainly PVC has been an important ingredient in our strategy. As you know, when PVC resin prices dropped, the housing materials products are much less cyclical in pricing. We're able to more or less hold our prices and as a result our margins improved, and you saw margins from high teens to 25%.
But as we venture into other products, you heard about the cement used for stones for roofing. Those are not PVC, and actually cement prices are still pretty high. They haven't come down a whole lot. Unlike polymer price came down a lot the last two years. So our margin cement product is not as great as our PVC product. But things move and change. That's the beauty about our business now we have such a broad product range and reaching out to such different aspects of a house, interior and exterior. So talk about our strategy. The strategy as my colleague mentioned is really adding value where we can add value and synergy. You heard about raw material synergy, you heard about our supply chain synergy and our distribution channel synergy.
So as we grow, we have coverage every single home, the U.S. and Canada, that our reach is very, very broad. So there's a huge amount of potential we can grow. Now having said it, our HIP business other than global compounds is really North America based and housing needs are really global and we have some of the best products. The Certa-Lok PVC pipe, nowhere else in the world has that which you don't need. Dig a trench and lay the pipe, you can really pull through underground and drilling. So those technologies are available. We have not used those technology anywhere else in the world. So as we grow the business, we'll selectively look at markets where we can lend our expertise. And we have business in 22 countries around the world, both PEM and HIP business. So the world market also is huge.
So I think we mentioned this is just the early stage of our growth in the HIP business. And HIP business is complicated. Every business we have how many SKU, how many products. If you go to our PEM business, you know, talk about maybe less than 100 SKUs in each business we have. Now having said it, you know the PEM as you know we're kind of at the bottom of the cycle. I think the destocking is pretty much over and now is we're waiting for the market to improve and you know China is one big part of also and the Chinese government doing everything they can to stimulate the economy. So so there are wars on the world. Infrastructure destruction is tremendous. So hopefully there will be peace on earth hopefully and there'll be reconstruction.
So I think both PEM and HIP businesses are in great position and we're looking for M&A. I know there are several friendly bankers in the room that we're looking at both growth in HIP and the PEM side. We constantly kick tires. But synergy is the most important. One plus one equals two is not very sexy and we really want to use our global footprint, feedstock, and our relationships to build synergy, add value in R&D. And you heard about automation and R&D and AI. I think we are at least on par with the competitors in some areas. We'll be leading a little bit and we want to use our competitive edge. Every bit counts. So everything we do we are working on detail, detail, details and add together. Hopefully we have better than competitors' results.
You can see from our results not just for one year but for the last 10, 20 years we're able to have a good return on investment. That culture our people is fantastic. We have a fantastic team. Not just people in this on the platform all the way down. You heard this. Renee's Global Compounds alone we have over 20 PhDs working globally, not just in the US on product development, customer relations, compliance with regulation which is a huge in the chemical business. Regulations that keep on piling up globally. Not just the US not only from carbon footprint, everything else, just everything you can hear about regulation, regulation, regulations. We have people complying and looking ahead of where the politicians are going and be ready for it.
So a small mom and pop vinyl, cable or compound, they can't do all the things we're doing. So because of our scale we're really spreading the cost and provide the services to our customers. So quality of product and services, it's both not just the products only differentiate us and we have, we're very, very optimistic on the future of Westlake. Great team, great people and great investors. So thank you for, for your tutelage and over us and give us a lot of ideas and our bankers ideas, directions, criticism, we're all ears. And we want to grow and not just grow for growth. We never talk about. You don't hear us 10%, 20% revenue growth, everything else. No, we are growing for bottom line and return on investment to shareholders is the key. So sorry to ramble along.
Thank you.
Morning, Albert, Steve, and team. Hassan Ahmed, Alembic Global. This was truly very helpful. You know, I much appreciate the deep dive that you guys did.
I guess my question is.
Along strategy lines as well. I mean, one thing that really struck.
Me as I sort of looked at.
The presentation was, you know, as I look at the various segments within HIP, you know, tens of thousands of SKUs that Albert, you touched on, obviously a very different portfolio relative to the Westlake of yesterday. So could you talk a bit about the learning curve associated with being, for lack of a better word, the simple company that you guys used to be with, maybe tens of SKUs to now tens of thousands of SKUs? Right. Are you comfortable with where you are now with regards to that learning curve? Is there more to be learned? Are there SKUs that need to be possibly eliminated? Could you squeeze out more margins as sort of you go through that process?
Thanks very much.
I don't know. I'll start, maybe hand it to Scott. But managing SKUs is always an ongoing process. So every year in our various businesses, we take a look at the slow moving SKUs. Of course, there's the high moving SKUs that we want to continue to operate and produce. But we take, you know, and a lot of the SKUs are like different colors, different styles. So relative to, you know, how do we manage all that? How did we learn this coming from a chemical company? Well, we have experts, you know, Scott comes from the building product trade, and maybe I'll let him talk a little bit about that.
I mean, SKU management is a cost of doing business in this space. Westlake is coming up very quickly on the curve, I would say, overall, and they've allowed us to do what we needed to do to manage that business. But our builders and our customers, they want new things. They, they want expanded product categories. They want to differentiate themselves from their neighbor next door when they're trying to sell things. And same in the remodel space. People want their house to look special. So although we do a lot of SKU management, when we introduce new colors, for example, we almost always retract some that were in existence. But it's not something that's going to suddenly go away, nor is it something that would add a tremendous amount of efficiency to eliminate, because it's a cost of doing business. It's a ticket to the game.
So you're always going to live in a world with a very high SKU count. But that's okay. We like that. We like that. It also differentiates ourselves from smaller players. So in the stone market, you can find more local providers of stone, but they offer four different colors and three different styles. And we offer 40. We're the preferred supplier because of that scale. But again, it's a cost of doing business. And Westlake is coming along well with understanding that difference.
I just want to add that we are learning, as you know, chemicals are much more simpler. The HIP business is very complicated, production products and customers, you know, so we have tens of thousands of customers, unlike chemical business. And we are also revamping our ERP system supply chain so we can use AI more readily. How to manage the SKUs customers, needs, everything else. And another thing is brand. We talk about branding, we have leading brand positions, but through acquisitions we have, I don't know, lots and lots of brands and as you know, some of the marketing, brand management costs expensive. So we have experts in the room to help us to consolidate brand, reduce the brand and focus on where our strength is. So it is something new for me.
But our management team on the floor and their team are in business for 30, 40 years. So they know what they're doing and it's really communicating between what their direction and strategy is and what corporate understanding would be. And I think we are learning pretty fast.
One thing just came to mind. I was thinking of, instead of maybe focusing on SKU rationalization, a great example of where the efficiencies come from is Steve's here. We had 33 websites at one point because each product category and each brand had its own website with its own expenses, with its own security systems and everything else. So that's where the efficiency lies, is we now are combining into one website that looks like 33 different websites if you wanted to, but it's only one site with one set of costs and so forth. So it's not so much focusing on trying to get more efficient by offering less products, it's getting more efficient in offering a lot of products in a better way. We'll go to the back next and.
Then.
John Roberts, Mizuho. There are a.
Lot of parallels between the epoxy supply chain and vinyls that's there. So we've got a lot of infrastructure applications. We've got composites and epoxies that are kind of the equivalent of compounds.
You have a head start in vinyls.
Do you envision epoxies kind of evolving longer term around a similar type strategy?
Yeah, epoxy is a total different animal and there are more fabrications downstream, whether it was fiberglass or with carbon fibers and technologies. So we are again, we are providing not only the epoxy resin but the whole system. We call it the EPS downstream system. That again, epoxy is kind of between HIP and normal polyethylene, PVC. That depends on the applications. They have a lot of chemicals, a lot of stabilizers, and a lot of fillers and strengths like carbon fiber and glass fiber that goes to the end product, whether it's for windmill, whether it's for lightweighting cars or, or wrapping the engine of EVs or circuit boards. And all these are formulated very, very differently. So we're just getting our feet wet, understanding the epoxy complexity and our value creation. You're absolutely right. It's the downstream. It's the formulated product that really adds value.
Selling commodity epoxy or liquid epoxy resin. It's just commodity and China. Everything else can do as good a job as we can. But the downstream formulation, again, we have a lot of PhDs around the world. We are global epoxy, the only company that's a global position that provides a solution to our customers. And that's the area where the epoxy is going also. Yes.
Hi, Frank.
Mitsch, Fermium Research.
Obviously, pipes and fittings is doing particularly well at the present time.
I must say I was impressed.
By the PVCO product. I'm curious if you could expand.
Upon the competitive dynamic in that area. How much of a head start do you have? What are others doing to catch up to PVCO?
Because that was fairly impressive. And then, Renee, on the compound side of things, you mentioned that you're accepting.
Some recycled scrap resin and then using.
That into some of the compound formulations. I'm curious as to what, as a.
percent of total that might be today.
Where is that going to get to?
In 3 or 4 years?
And then lastly, I have to ask.
The question, what color did Taylor pick?
Okay, let me start with PVCO. So PVCO is manufactured by technology, which are provided by a third party. There are very few companies in the world that actually have the inline technology to manufacture PVCO. We are. The equipment we are using is from the leading manufacturer in the world. And the equipment that we've purchased, pretty much. This company is limited in terms of how many lines they can manufacture per year. And the equipment that we've already acquired from them gives us a significant head start on our competitors. So it is our strategy to continue to grow PVCO at 3-5 times the capacity and production compared to what we currently have. So that will continue. It's a great product. It is a better product from every point of view.
By the way, the PVCO is expensive. It's not a mom and pop can invest on equipment. The length of the line is more than a football field long. Investment, not only the equipment, but building and everything else, but also it's very technically oriented. Even you had equipment to manufacture it properly and the testings and the monitoring, it's very high tech. So it's just not any mom and pop guys can just buy equipment and make PVCO. And this one mentioned that Andre mentioned that PVCO is 40% lighter compared to conventional PVC. Not only is good for sustainability and for the environment, but it's good for the margin as well.
So to answer your question on sustainability. So actually just in the last 12 months we've been out talking to a lot of our global customers and sharing with them our capabilities and we're still assessing the interest level and setting out that growth strategy of bringing back all of the various materials from them or other sources to be able to sell. And as I mentioned, this is not something that we're developing and just pushing down. This is really being generated through their interest in meeting their goals. So I don't have an estimate at this time, but our Dimex business has been growing double digits as you saw. It continues to perform very well and we will continue to expand it organically as we need to to process more scrap that we're able to acquire in the business.
As far as the Taylor Swift color goes, I better not share that yet with you. It's a secret.
So for those asking questions on the webcast, we've had some technical difficulty where we can't receive them here. So I'd ask you that you submit them to our investor relations email and we will get back to you with the answers to your questions. So we'll continue here in the room in the back. Go ahead. Aleksey Yefremov of KeyBank, you're targeting 20.
To 22% EBITDA margin this year.
Should we think of that as a?
Base to grow from?
What would you expect margins to be?
In two to three years? And if you had a trade off.
Between high margins or higher growth in.
This business, which one do you lean in any direction?
Please don't answer that.
You'd prefer both?
Well, of course I do prefer both, but I think you see us trending more to that 22% from where we are. I mentioned the backlog and you see this both in all three of their business comments earlier this morning. As we think about what ought to be over a business cycle, we do think, given the commentary that you saw about product innovation, organic growth in products, organic growth in cross selling and then inorganic growth. We do believe that those margins should trend higher over this cycle.
Right up here in the front. We'll come over there next.
Hi, Patrick Cunningham with Citi. I had a question on the robotics for materials handling.
So you mentioned you completed 20 installations.
In the last year.
How many more sites are you looking?
To deploy that to in the near term?
What would the potential cost savings be there? Yeah, I'll just try to tackle that one. Looking across, you know, we're basically a fabrication and then materials handling business. So every one of our plants we are making some material, pushing it down the line, whether it is extrusion like PVC siding or it's a concrete roof tile that comes out of a mold or the stone products. But we do materials handling at all these plants. And so our focus so far has been on the materials handling at the end of the lines where we do the packaging. So this is typically a rather low skilled workforce and we need a lot of people. And so every time we put in a robot, you saw some of the numbers, we can reduce something like 6-12 people. So these have pretty good paybacks.
So we'll continue, I think in the next year. We've got enough projects to do about a similar number. It depends on the robotics that we pick and the complexity of the packaging operation, on how fast we can execute these. But you know, they're focused on safety and productivity and then it helps our cost position.
Thanks.
Josh Specter with UBS.
So I wanted to come think about.
The mix within HIP here. Westlake has a somewhat unique strategy relative to our analysis of building product peers and that your breadth is quite wide. A lot of the conversation here is that breadth is a benefit. I guess we see more focus at.
Some of the peers which aren't doing that.
So what are they missing? And then as you look at your.
Portfolio, I guess how do you weigh?
That broader portfolio and the growth that you presented versus maybe trimming some of the lower growth parts of it and trying to think about how to outgrow the business and focus on the highest.
Growth parts of it.
Maybe I start here and then Bob, have you add a little bit here. But you continue to see the consolidation of our key customers. These are the distribution players, and certainly as we continue to see that consolidation, the importance to continue to be incredibly relevant, be able to service them nationwide, and be able to meet the needs that we have of those key customers of our customers. And those of the builders. And so, Bob, you may want to add to that.
Yeah, I might let Scott talk to this because he's living it every day. Yeah.
Although we have a wide breadth of products, I would say that we continually go back to our core strategy, which is becoming more relevant to our one and two stack distribution partners. So we're not expanding into product categories very often that don't move through their four walls. So even though it seems like we're getting wider and wider and wider, not deeper, we're focused on an element, a customer base. There are steps outside of that. So if you look at everything that goes into a home, obviously there's a lot of things we're not participating in, but we're not trying to participate in everything. We're really trying to focus in on our core customers and what it is they need rather than just what could be possible to sell.
Just a question on the integration or a couple questions on the integration which you say has a lot of value.
One, what's the % of sales within.
HIP to that's product that's transferred from PEM? The raw material comes in.
So we're selling between 20% and 30% of that PVC resin into our building products business. They're the largest buyer here in North America of PVC resin. So we're selling that component of resin into these various businesses.
20%-30% of HIP is.
Stuff that started in PEM within PBC, but all in.
If you look all in from PEM, the stuff that gets transferred into HIP, what's the sales?
It's going to be less than half of that lesson.
Okay. And then you talked about HIP picking.
Up the margin when PEM, when PVC basically fell off.
And so that transferred into HIP. Does that go back the other way? If you think through two or three cycles, does the HIP business get to keep the same margin? So it's kind of like paint, where every time you go through a raw material cycle, the margins get higher and higher. Or are you just trying to get.
Kind of a flat margin where it'll.
Swing back and forth between the two segments?
Well, and I may have Bob talk a little bit how pricing works within this business. But unlike our chemical business, where you're setting prices on a monthly basis, whether they're going up or whether they're going down, we don't see that same kind of pricing dynamic going on really within our building products business.
Yeah, it's a longer cycle in the building products business. So in some cases there's some products that you have to price it at the beginning of the year and that's what you have. In other products there is some flexibility to move with raw materials but it's a different pricing dynamic that we see.
I wish HIP's margin goes higher and higher every year so that will be our goal. But you can see that our margin among the building material companies among the highest range quartile. So we are happy. And you know also home builders really want very cost competitive product because their home prices are too high. People can't afford it. So the pressure of giving price down is always there. So it's a balancing act. So our goal is to grow volume wise with our customers, as Steve mentioned, satisfy their needs and so long we can make good ROI on investment through organic expansion or inorganic acquisition with synergy. So our goal is to really earn above our cost capital in all our businesses. And we see that the HIP business building material is much more fragmented than the PEM business.
PEM we are difficult to do M&A because we are either number 1, 2, 3 some of the positions. So it's really more organic than inorganic. Whereas in the HIP side a lot of opportunities out there, not only the U.S. globally but our yardstick guidance is always risk-adjusted return on investment capital.
Then just the last one on that. You've talked about a lot of synergies between the two segments if you decided to separate them. How much dis-synergy from an operational standpoint is? Or is it $100 million? $200 million? $300 million? You know, roughly what would it cost.
You guys, EBITDA-wise, to separate the businesses if they were run separately?
I think you see those synergies continuing to be beneficial to us. So definitely when you think about that, it's not just really the dollars per se because one of the important elements here is the strength of the balance sheet to continue to grow this business. Remember, we also have some long-dated warranties that are associated with many of our products. The ability to have a strong balance sheet to stand behind those warranties is equally important to our customer base. So it's not all just necessarily the dollars of dyssynergy that may occur should there be a separation. It's also the strength to really continue to invest and grow this business as well as the ability to have a strong balance sheet to backstop warranties and the product innovation you saw going forward with the business.
So it's not all just a dis-synergy necessarily from a cost perspective. Jeff, I saw that you had one other question.
Jeffrey Zekauskas from J.P. Morgan. If I can ask sort of a broader question. Valuation about Westlake. Westlake's very different than Dow or Lyondell in that the Chao family, I think, owns 70% of Westlake. And in thinking through the value of the company, you really think as owners, is it the case that Westlake is a company that will be owned through further generations, or is this the last generation of Chao that will own Westlake or control Westlake?
Actually, we have the next generation of Chao. My son John Chao is sitting in the back. So we have. He works for Westlake, but we also have four next generation Chaos on the board.
So.
They've been on the board, and if not, they were what you call observers on the board for, I think, close to 10 years now. So this is very important to the family and the well-being of Westlake. We're not looking for this quarter-to-quarter ups and downs, all that that come with the territory. Our business is still cyclical, which is not, but it is. But we really look for long-term value added, and I think we call them the G3, the third generation. Sustainability, recycling and carbon emissions among young people are very important to them. They kind of given us directions also, and you heard all the discussion we'll be working on, and this will be the trend, and we are looking at, even on the PEM side, whether it makes sense to make biorenewable, degradable products. The needs are there.
The issue is how can we meet the needs of customer society and still have a good return on investment? So our interests.