Westlake Chemical Partners LP Reports Mixed 2023 Financial Results Amid Higher Interest Expenses
Net Income: Q4 net income decreased to $14.3 million from $16.8 million in Q4 2022.
Distributable Cash Flow: Full year MLP distributable cash flow fell to $62.6 million, down from $75.9 million in 2022.
Quarterly Distribution: Declared quarterly distribution of $0.4714 per unit, marking the 38th consecutive payout.
Operational Highlights: Completed maintenance at Calvert City ethylene unit; plans for Petro 1 unit turnaround in H2 2024.
Financial Metrics: Full year net income per limited partner unit decreased to $1.54 from $1.82 in 2022.
Cash Flow: Operating activities generated $452.0 million in cash flow for the full year, a decrease from $463.7 million in 2022.
Balance Sheet: Total assets stood at $1.316 billion as of December 31, 2023, down from $1.372 billion the previous year.
On February 20, 2024, Westlake Chemical Partners LP (NYSE:WLKP) released its 8-K filing, detailing its financial performance for the fourth quarter and full year of 2023. The company, which operates in the chemical industry in the United States through OpCo, reported a decrease in net income and cash flows from operating activities, primarily due to higher interest expenses and less favorable working capital changes.
Financial Performance Overview
WLKP's net income for the fourth quarter of 2023 was $14.3 million, or $0.41 per limited partner unit, a decrease from the $16.8 million reported in the same period of the previous year. The company attributes the decline mainly to increased interest expenses. Despite a quarterly increase in net income compared to the third quarter of 2023, the full year net income for 2023 decreased to $54.3 million, or $1.54 per limited partner unit, from $64.2 million in 2022.
Cash flows from operating activities for the fourth quarter decreased to $107.7 million from $122.6 million in the fourth quarter of 2022. The full year cash flows from operating activities also saw a decrease to $452.0 million from $463.7 million in the previous year. The company's MLP distributable cash flow for the year ended December 31, 2023, was $62.6 million, a decrease from the $75.9 million reported for the year ended December 31, 2022.
Operational and Strategic Highlights
Albert Chao, President and Chief Executive Officer of WLKP, commented on the company's operational achievements, including the successful completion of the maintenance turnaround at the Calvert City ethylene unit. He also noted the strategic timing of third-party sales to maximize margins. However, Chao cautioned that the upcoming maintenance turnaround at the Petro 1 ethylene unit and other factors might lead to a temporary dip in the coverage ratio below 1.00x in 2024.
The Partnership performed well in 2023 as we successfully completed the maintenance turnaround at our Calvert City ethylene unit in May on schedule. We also maximized the margin on third-party ethylene volumes in 2023 by opportunistically timing our third-party sales," said Albert Chao, President and Chief Executive Officer. "We plan to perform a maintenance turnaround at our Petro 1 ethylene unit in the second half of 2024. Combined with our outlook for continued low third-party ethylene margins and elevated interest rates, the lost production during the Petro 1 turnaround may cause our coverage ratio to dip below 1.00x in 2024. However, after the turnarounds at Petro 2 in 2021, Calvert City in 2023 and Petro 1 in 2024, we should be positioned to run at full capacity, with a corresponding benefit to our coverage ratio in the following years.
Financial Position and Outlook
WLKP's balance sheet reflects a total asset value of $1.316 billion as of December 31, 2023, a decrease from $1.372 billion at the end of 2022. The company's long-term debt payable to Westlake remained stable at $399.7 million. The Partnership's declared quarterly distribution of $0.4714 per unit is consistent with its history of regular payouts to unitholders.
Despite the challenges faced in 2023, including higher interest expenses and the impact of maintenance activities, WLKP's stable and predictable cash flows, as per the Ethylene Sales Agreement with Westlake, remain a cornerstone of the company's financial strategy. The company's focus on operational efficiency and strategic asset management will continue to be critical as it navigates the anticipated headwinds in 2024.
For more detailed financial information and to view the full earnings release, please visit the WLKP investor relations page.
Explore the complete 8-K earnings release (here) from Westlake Chemical Partners LP for further details.
This article first appeared on GuruFocus.
