Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Westlake Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions] And as a reminder, ladies and gentlemen, this conference is being recorded today, October 30, 2025. I would now like to turn the call over to today's host, Jeff Holy, Westlake's Vice President and Chief Accounting Officer. Sir, you may begin.

Thank you, Stefan. Good morning, everyone, and welcome to the Westlake Corporation conference call to discuss our third quarter 2025 results. I'm joined today by Albert Chao, our Executive Chairman; Jean-Marc Gilson, our President and CEO; Steve Bender, our Executive Vice President and Chief Financial Officer; and other members of our management team. During the call, we will refer to our 2 reporting segments: Performance and Essential Materials, which we refer to as PEM or Materials; and Housing and Infrastructure Products, which we refer to as HIP or Products. Today's conference call will begin with Jean-Marc, who will open with a few comments regarding Westlake's performance. Steve will then discuss our financial and operating results, after which Jean-Marc will add a few concluding comments, and we'll open the call up to questions. During the third quarter of 2025, we recorded a noncash impairment charge of $727 million, representing all of the goodwill associated with our North American Chlorovinyls business unit. We also accrued expenses of $17 million related to previously announced facilities closures. We refer to these expense items, which in aggregate were $744 million as the identified items in our earnings release and on this conference call. References to income from operations, EBITDA, net income and earnings per share on this call exclude the financial impact of the identified items. As such, comments made on this call will be in regard to our underlying business results using non-GAAP financial measures. A reconciliation of these non-GAAP financial measures to GAAP financial measures is provided in our earnings release, which is available in the Investor Relations section of our website. Today, management is going to discuss certain topics that will contain forward-looking information based on management's beliefs as well as assumptions made by and information currently available to management. These forward-looking…

Thank you, Jeff, and good morning, everyone. We appreciate you joining us to discuss our third quarter 2025 results. For the third quarter of 2025, we reported EBITDA of $313 million on net sales of $2.8 billion. Compared to the second quarter of 2025, sales and EBITDA decreased as improved production and sales volume in our PEM segment was more than offset by lower sales volume in our HIP segment and PEM's lower average selling price. While North American residential construction demand has softened in 2025, HIP sales volume and total sales were comparable to those in 2024. This sales resiliency illustrates the strength of our relationships with key customers and our broad and deep portfolio as we continue to grow in this important market. As compared to the third quarter of 2024, HIP's margin and EBITDA were negatively impacted by a sales mix shift to lower price and lower-margin products as our key customers work to address the home price affordability impact felt by home buyers. In addition, HIP's EBITDA includes some period-related administrative restructuring and integration expenses in the third quarter of 2025 that are expected to be of a nonrecurring nature. Overall, our HIP business is performing well in light of the affordability headwinds facing the new home construction market. We remain very positive on HIP's long-term growth outlook, supported by the need to rebuild the North American housing stock following over a decade of underbuilding of homes, and we have continued to invest in the HIP business to accelerate our growth. The construction of a new PVCO pipe facility in North Texas to be completed in 2026, and the recently announced acquisition of ACI are some visible examples of our commitment to HIP through these exciting growth-oriented investments. The ACI acquisition significantly expands our global compound…

Thank you, Jean-Marc, and good morning, everyone. As a reminder, my comments regarding the income from operations, EBITDA, net income and earnings per share all exclude the financial impact of the identified items. Westlake reported a loss of $38 million or $0.29 per share in the third quarter on sales of $2.8 billion. The loss in the third quarter of 2025 was $26 million higher than the second quarter of 2025, primarily due to lower average sales price, primarily in PVC resin in our PEM segment. The challenging global macroeconomic environment and imbalance in supply/demand for many of PEM's products has resulted in an extended trough. As a result, during the third quarter of 2025, we took a noncash impairment charge of $727 million for all of the goodwill associated with PEM's North American chlorovinyls business. While this impairment reflects the near-term challenges in the North American chlorovinyl business faces, we believe the cost reduction actions we are taking, combined with the improved plant reliability will turn this business to levels of profitability that it is capable of generating. For the third quarter of 2025, our utilization of the FIFO method of accounting resulted in an unfavorable pretax impact of $37 million compared to what earnings would have been if we had reported on the LIFO method. This is only an estimate and has not been audited. At a segment level, approximately $32 million of the unfavorable impact was at PEM and the remaining $5 million unfavorable FIFO impact was at HIP. Before I discuss the details of our segment results, I want to provide some high-level thoughts on the quarter. Our HIP segment performed well, holding sales in line year-over-year despite the slowdown in North American residential construction activity, which highlights our important market position with our key customers,…

Thank you, Steve. Looking forward, we are taking proactive steps to improve our financial performance. Our HIP segment will continue to execute its successful strategy utilizing 3 key levers: First, winning with the winners. As we demonstrated this year, even in a slower market, the value of our brands and our broad national footprint delivers significant value for HIPs customers. As a supplier of choice to building product distributors and large national homebuilders, we expect to generate long-term organic sales growth of 5% to 7% per annum. Second, new product innovation. Our HIP business continues to commercialize breakthrough new technologies that create value for our customers such as our PVCO pipe products. This advanced molecular-oriented PVC pipe was introduced in 2021 and has experienced solid customer adoption by delivering water solutions with 40% less PVC. Construction on our new PVCO plant in North Texas continues with an expected start-up in the latter part of 2026 to meet growing customer demand. Third, acquisitions. HIP has demonstrated a proven track record of accretive acquisitions. Our HIP businesses compete in relatively fragmented industries with significant opportunities for both bolt-on and strategic acquisitions. We see significant opportunities to leverage our sales and distribution platforms that are currently in place to create synergies and drive earnings growth. Shifting to PEM. Our drive to return this segment to profitability revolves around our 3-pillar profitability improvement strategy, which I have already detailed, and which is well underway. While we are optimistic that global demand growth for PEMs product will improve, we are squarely focused on actions within our control while the global supply and demand picture improves. This includes improving the reliability of our plants so that we can predictably serve our customers. As a reminder, in 2025, PEM's EBITDA was negatively impacted by approximately $200 million from operating issues. We also have identified significant operational cost savings as part of our company-wide $200 million cost savings target for 2026. Finally, strategic asset optimization actions that we have already taken, such as the Pernis shutdown are expected to generate over $100 million a year in additional savings starting next year. As we progress into 2026, we will continue to optimize our network and take action when and where necessary to drive improved profitability at our PEM segment. Before I open the call to your questions, I want to close by highlighting Westlake's foundational strength, which continue to serve us well. These strengths include a diversified and complementary portfolio of businesses, our vertically integrated business model, our globally advantaged feedstock and energy position in the U.S. and our investment-grade rated balance sheet with $2.1 billion of cash and securities. As we end 2025 and transition into 2026, we will continue to capitalize on these strengths to create value for our shareholders. Thank you very much for listening to our third quarter earnings call. I will now turn the call back over to Jeff. Jeff?

Thank you, Jean-Marc. Before we begin taking questions, I would like to remind listeners that our earnings presentation, which provides additional clarity into our results, is available on our website, and a replay of this teleconference will be available 2 hours after the call has ended. Stefan, we will now take questions.

[Operator Instructions] Our first question comes from the line of David Begleiter of Deutsche Bank.

Jean-Marc, we've seen polyethylene an increasingly weakening spot market. How will that affect your earnings in the fourth quarter? And what does that mean for -- if anything, for the October price increase you have out there for polyethylene?

Yes. Thank you for the question. No, you're right. We are seeing a, I would say, a little bit of a weakening in polyethylene prices. At the same time, ethane is still seeing in the mid-20s in terms of price, and this is certainly putting pressure on our ethylene margins. There is plenty of supply in the polyethylene segment. We have a very good position, very good operating efficiency in the quarter. We're expecting the same over the next quarter and we will do our best to gather and create as much value as we can in that segment. So overall, it's been tough, but I would say relatively stable in the ethylene segment. We are -- as you expect, the last quarter is always subject also to some seasonality, and that's probably what we're going to see in conjunction with a stable to a little bit lower prices in the last quarter. So that's what we expect getting into the last quarter.

And just for Albert, given the pressures you're seeing in the commodity chemical space, are you and the Board still committed to this current portfolio construct with a building products business with a petrochemical business? Or is there a thinking that perhaps these businesses at somewhere down the road are being separated?

Yes. Certainly, we are looking at various combination of business. We believe in the strength of the 2 business being together, as you know that our PVC business is a major supplier to our HIP business in North America. And we believe that with the balance of supply-demand globally improving over the next few years that with our cost restructuring in our PVC vinyl business in the U.S., we will be much better positioned to serve our customer, both domestically and overseas. And as we see interest rate coming down, it will certainly help the housing construction business in the U.S. that will also improve our HIP business as well as our PVC business. So we believe there are synergies being together, but we understand from the valuation of the chemical and construction building material business, they are different. So we are hoping that the market can see the sum of the parts, but we'll evaluate options as we go.

Our next question comes from the line of Frank Mitsch of Fermium Research.

You discussed some of the weakness in the polyethylene markets. PVC hasn't exactly been covering itself in glory. What is your near and midterm outlook on the PVC side of things? And what will it take to get it back on track?

Yes. So -- yes, thank you for the question. I will -- I'll start and then will hand it over to Steve. The forecast for -- you're right. I mean, the chlorovinyl chain has been challenged this year with prices going down. And hence, we are taking, I mean, efforts on the cost side to bring -- to make sure that we are in a position to compete even at these low prices. So that's why we have started the additional cost savings on top of previous ones. And we are hopeful that we will get back into a position where we will deliver acceptable financial returns in that segment in a not-too-distant future.

And just to add on, Frank, as Jean-Marc was noting, big focus and actions being taken now for cost reductions, improving reliability. We're already seeing those results in the third quarter. And here we are well into the fourth quarter, already seeing improved operating reliability, which allows us to reduce that unit cost. So big efforts on that front. But admittedly, it may take some further supply reductions in the marketplace. And frankly, as you think about what is happening already and been announced in the European market, you've already seen reductions in chlor-alkali announcements, both in chlor-alkali as well as in PVC. So I think some of those higher cost players have already begun to take actions to address the oversupply and high-cost positions.

And Steve, if I could follow up on the ACI acquisition. You noted in the release what the sales were in 2024. I was wondering if you might be able to give us an idea of what transpired in 2025. And are we looking at HIP margin type of business? Anything on D&A as we look to model 2026 with the ACI acquisition built into the company?

Yes. So Frank, good question. And the ACI business is a very strong and it's a global compounding business in that crosslinked polyethylene and silicone business. And it does have good margins in that business. Of course, compounding businesses don't tend to very -- have very high-end ranges of margins. But I would say the range that you're seeing in our HIP segment are reflective of what I would expect to be delivered as we integrate ACI into our business. We think we have compelling synergies with our existing compounds business that is already a global business. And so I do expect the margins that you see in our HIP segment should be reflective of what we achieve once we get these synergies achieved in the ACI acquisition.

Our next question comes from the line of Aleksey Yefremov of KeyBanc Capital Markets.

I was hoping you could just discuss further in detail the sources of this revision to your HIP guidance and how it affects your maybe initial views of 2026 for the HIP segment?

I'm sorry, Aleksey, could I get you to say that again? You were a little faint as you were asking that question.

Apologies. I was just asking why the new HIP guidance is lower? What product lines or -- what was the reason behind it? And then any initial thoughts on HIP in '26?

Yes. Thank you. I'm sorry. It was -- your question initially was a little faint. Thank you for that question. So again, I'd say that with the shifting in product mix that we saw occurred in the third quarter addressing affordability by many of our customers, we saw a shift from the mix of products in that space. And as we think about the period-related costs we had in the third quarter, it also had an impact in the overall 2025 guidance that we have provided. I think a lot of those costs that we had that were period related are largely nonrecurring in nature. And so as we think about the outlook for 2026, our guidance for construction activities is similar to what we've seen in 2025. If you listen to some of the conversations that are occurring publicly with some of our larger homebuilders nationwide, they're guiding to similar levels of construction activity, and we are believing to work very closely with those homebuilding construction companies. So I think our expectation is while we see rates likely to continue to drift further down on the short end of the curve, I do expect that the longer end of the curve will drift lower. And we do expect there will be more activity in the construction level in '26. But I would still say we expect the range of construction activity to be 1.3 million to 1.4 million housing starts, frankly, very similar to 2025. But remember, only half of our HIP business is new construction. I want to remind you that the other half is repair and remodeling, and the repair and remodeling business has continued to perform very well. So this is why we think that we'll continue to see good continuing performance in 2026.

And I was hoping to get some color on caustic soda market, domestic and export. What is your view for the rest of the year?

So I'd say the market in caustic is well supplied. We expect that as we look forward into the market, while the consultants have some indication of price momentum, I would expect that pricing in the market remain relatively stable at this stage. But I think the market is well supplied. I would say the same is true on the chlorine side as well.

Our next question comes from the line of Patrick Cunningham with Citi.

Maybe just a follow-up on ACI, more of a general question. Are you seeing more opportunities on the PVC compounding or other sort of materials side relative to the building products space, just given where the difference in valuations is? And then maybe if you could just comment on what the pipeline in general looks like.

Yes. I'd say, Patrick, that there are opportunities that we see in expanding the footprint of HIP, both in product offering and ranges, whether they're in the compounding sector or our pipe and fittings businesses or our exterior building products business, the Royal business. I'd say there's ongoing good dialogue that we have with parties who may choose to monetize some of those assets. And it's always a function of how does that fit into our business and the associated synergies. So I'd say there's really good opportunity as we look forward, but we're always looking for those synergistic fits into our overall portfolio.

Understood. And then maybe just on the quarter-on-quarter sequential weakness on PVC. You mentioned a shift to export markets. Is this sort of a reversion back to your normal level of exports given the better operating rates? Or is there something abnormal here in terms of higher split towards the export markets?

No, I think the industry has historically exported PVC resin in the 40s percent of production. And our shift back to some exports was simply improving reliability over the course of the third quarter. And I think going back, as you may recall, our historic levels of exports are below that industry average of 40 or so percent. We're in the mid-30s to low 30s on an average basis. So it's simply just improving reliability, improving production and putting some of that extra production back into historic market levels as we have in the past.

Our next question comes from the line of John Roberts of Mizuho.

Did you get an opportunity to bid for the OxyChem business? Or was the antitrust there just even too far for this administration and something Oxy maybe didn't want to deal with?

Well, I cannot obviously speak to transactions that we consider, it's a large transaction, and we are a very large player in this space. So we do have to be mindful that there could be regulatory issues around such a transaction. But I would say that we're constantly looking for good opportunities and certainly, whether it be in the HIP side of our business or on the PEM side of the business. But there's always opportunities that we look to, to see if there's real synergy value and real opportunities to grow the business in a value-added way.

Our next question comes from the line of Hassan Ahmed of Alembic Global Advisors.

Just trying to -- I know in your prepared remarks; you talked a fair bit about sort of cost savings and asset optimization and the like. But just trying to get a better sense of a bridge to 2026 EBITDA-wise. It seems you guys will get $200 million in cost savings in '26, an incremental $100 million from the footprint optimization. And if I heard correctly, you had operational issues in PEM, accounting for around $200 million in 2025, which won't be there in '26. So -- and then obviously, some accretion from the acquisition. So I mean, is it fair to assume that via self-help and these things that I just laid out, I mean, on a year-over-year basis, all else equal, EBITDA next year would be $500 million higher than this year?

Yes. No, I think as you think about the pillars that Jean-Marc spoke to and the efforts that we have underway for cost reduction, improved reliability and asset optimization, I think you've outlined well the guidance that we're trying to speak to in terms of the actions in Pernis, the cost reduction initiatives and the opportunity to improve reliability. And when you think of the reliability challenges, the unplanned outage we had this year, a higher level of planned turnarounds in 2025, but also a number of unplanned outages as well. As we think about 2026, of course, there are going to be some planned turnarounds. And of course, there could be some unplanned outages. But I think you've outlined the direction that we're moving to improve reliability, reduce our cost and really act on opportunities to rationalize assets that are not performing well to really improve the bottom line. So I think you kind of framed the thinking that we have well.

Fair enough. And as a follow-up, kind of linking a couple of the past questions together, I mean, this $727 million impairment associated with the PEM segment, how should we think about that in light of some of the valuation data points provided by the OxyChem deal? I mean, obviously, that says something about the fundamentals there, Berkshire coming in and maybe scooping these assets up at the bottom of the cycle. How does that fit into this impairment you guys took? And again, going back to one of the earlier questions, just potentially thinking about the overall portfolio, is there some sort of valuation leakage with the way the business is set up today?

So the impairment is a mechanical process that one has to undertake on an ongoing basis. And when you think about the extended trough that we've seen in the chlorovinyls business, it was clear to us that, that impairment was necessary to be taken. But I think you saw from our prepared remarks that we see the business really in a condition to continue to see good demand over the medium to long term. So we think it really positions the business to continue to return a very solid return on assets as we go forward. And the positioning that we have, we think, is well positioned to capture that value medium to long term. But clearly, we're in this trough conditions today. And those trough conditions really are the drivers behind that impairment that is really just a mechanical process that one has to undertake on a regular basis. But nevertheless, we think the investment that we've made is well positioned, and we'll continue to really reap the benefits of this investment over time. But that's not to say that we won't make sure all assets are performing well as they should. And if they don't, we'll assess where the right value proposition sits.

Our next question comes from the line of Josh Spector of UBS.

I just wanted to ask around the $20 million of period-related expenses and HIP. Can you tell us what exactly that was? And is that really a 1 quarter cost? Or is that something that maybe lingers for a few more quarters?

No, I called these out as period related because they really are administrative, and transition and integration related. And so they really are nonrecurring in the nature of those items, which is why I call them out as period related.

But would you expect more integration costs in fourth quarter? And are these numbers included in that $200 million reliability bucket you've called out? Or is this entirely separate?

I see those -- I do not see those at this stage in the fourth quarter, and I don't see those as likely to be near-term repeating.

Our next question comes from the line of Matthew DeYoe of Bank of America.

How are you thinking about operating rates in polyethylene? Because it feels like the industry is running a bit -- I guess, how you say, if the industry does run hot, it feels like product starts to back up domestically. And I think we saw that in July and August. But I don't know if I'm extrapolating too much off of shorter duration or shorter -- fewer data points. What's your perception there? And how do you think about your own utilization rates?

As you think about operating rates, we recognize that operating these plants to service our customers is important. But at the same time, we're going to be operating these facilities in a manner that creates real value. And so if those operating rates are hovering today for the industry in the mid-80s to low 80s, we certainly had some planned plant maintenance that we undertook in the third quarter. And so I would expect that our operating rates for the year will be slightly lower than industry average. But as we think about our polyethylene assets, we'll continue to make sure the operating rates reflect the value add that we see in the marketplace. And if we need to adjust those operating rates accordingly, we will.

Our next question comes from the line of Duffy Fischer of Goldman Sachs.

If you back into the number for HIP, just with what you've given us because we've got the year at the low end at the 4.2% and the 20%, you get a little under $150 million, which is down 20% year-on-year, roughly equal to Q3, which was down about 20%, but you don't have the period cost you just said. So how should we think about that back half number basically being a base to grow into 2026? It seems like HIP numbers should be down next year just given how low we are in the back half relative to the year. But any guidance on that would be helpful.

Yes. So Duffy, we see the seasonal construction period begin to slow in Q4. And so if you think about the new construction activity that typically occurs in the fourth quarter, it tends to be slower. But as we look forward, and again, I just want to remind you that half of our HIP business is repair and remodeling. So it's not entirely tied to the new construction markets that we see the nationwide builders dealing with at this stage. And so we still remain very constructive in our outlook for 2026 in terms of how we see the HIP business continuing to perform. There, of course, is seasonality in the first quarter and in the fourth quarter. So as we look at the fourth quarter that we're in today going into the early stages of first quarter, there is naturally seasonality and this is why we're guiding not only to the lower end of this range for the period-related expenses we had in the third quarter, but also some of the slowing that we typically see in the fourth quarter. But as we look forward into 2026, recognizing that half our business is new construction, the other half is repair and remodeling, we still remain relatively constructive in our outlook. Those -- that constructive outlook is really tied to the dialogue that we're having really with these nationwide builders who, while they are working down their completed and unsold inventory, still seem to be moving forward with their construction plans.

Fair enough. And then if I could just go back to the write-down in the PEM section, chlorovinyl, obviously everything has to be forward-looking, right? The fact we've been in a long trough, it's not a backward-looking write-down, it's your expectations going forward. So what's changed, I guess, kind of in your 10-year outlook for chlorovinyls? And how much of the hit is downstream and how much of the hit would be kind of at the chlor-alkali level?

Yes. This was, of course, just really on a chlor-alkali base. And so as we think about the discounted cash flows that one has to run for the assessment of goodwill impairment, you can recognize that the extended trough we have triggered that impairment. But when we think about the fact there was no impairment of the assets themselves, it signals really the fact that we believe that this business continues to perform and will perform well in the medium to long term. It's just the extended nature of this trough really in the chlorovinyls business.

Our next question comes from the line of Vincent Andrews of Morgan Stanley.

This is Turner Hinrichs on for Vincent. So I wanted to level set a little bit for your comments on outages. You all mentioned earlier, of course, the issues constituting around a $200 million impact this year. And you also had the Petro 1 turnaround, I believe, in addition to that, $80 million. So in the absence of unplanned outages, how are you all thinking about maintenance costs next year relative to this year? And is that the right way of framing it?

Yes. And so as I say, 2025 was a much heavier year for planned outages, planned turnarounds. And so as I think about 2026, we don't have an ethylene cracker planned outage for turnaround. We only have some of the smaller units, and those occur on a pretty regular basis every 2 to 3 years, whether they are PVC or chlor-alkali or polyethylene assets, which typically turn every 2 to 3 years. And so the relative maintenance expense for turnarounds in 2026 should be much lower than they were in 2025.

Okay. I think that answers the question. How are you thinking about, if you can provide any color on this, go-forward CapEx, specifically, if the market environment remains relatively similar next year to this year, is it safe to assume that CapEx might still be in the $900 million range or perhaps $1 billion range?

Yes. We're continuing to finalize our budget plans for 2026, but I would say that I would expect it to be similar in relative size.

Our next question comes from the line of Pete Osterland of Truist Securities.

Within PEM, you had a $36 million tailwind from improved plant reliability in the third quarter. Do you expect this to be a sequential tailwind in fourth quarter as well? And what is a reasonable amount to expect there? Could it be another $35 million or so?

And so while we have seen some improved reliability, I would expect that we'll continue to see improved reliability in the fourth quarter. The amount of that reliability dollar-wise is really attributable to the assumptions that you might have on pricing. And so I have to refer back to you in terms of what your assumptions are for pricing in the model, but we are seeing improved reliability in Q3 and in Q4. So I do expect a tailwind, but the quantification of that is really a function of what pricing assumption you might have in your models.

Got it. And then I also just wanted to follow up on your plans for the $200 million of cost saves in '26. Could you share the cadence you expect throughout the year for actioning those cost savings? And I guess how much of that $200 million do you expect will actually be realized in '26 EBITDA relative to 2025?

Yes. And so I do expect actions -- I do expect those all to be pocketed in 2026. Actions actually are underway now. And so whether these are actions that relate to supply chain, to feedstock to a wide range of what I would say, structural costs that are coming out of the business. So we'll begin to provide a little bit more color in '26 as we get into the actions in terms of the cadence. But I do fully expect to pocket that $200 million in 2026 because actions clearly are underway, well defined and well actioned at this stage and beginning to materialize in '26. Of course, we have actions underway for 2025 as well. And as I mentioned, we've had $115 million achieved toward our $150 million to $175 million target in '25. So we expect that we are moving forward. And many of these leverages the actions in '25 that will continue to be additive in 2026.

Our next question comes from the line of Matthew Blair of TPH.

You mentioned a few times the affordability issues in the U.S. housing market. How are you responding here? Are you introducing more low-cost products? Are you changing the raw materials on any of your existing products? Or maybe this doesn't warrant a change in strategy from you, but could you discuss that?

Yes. And so when you think about our HIP businesses, we do have the range of good, better, best range of products. And that allows us to be able to address the affordability issues that some of the builders may have as they think about trying to address the affordability issues of homes. And so I spoke earlier about some of the product mix shift that we saw in Q3, and that's part of the reasoning behind some of that product mix shift is moving products from maybe good, better, best to be able to address the affordability issues that we see builders approaching us and discussing.

Sounds good. And then could you also discuss why you re-upped the ethylene supply agreement with the MLP? Does this raise costs at a time when margin -- when the industry is in a tough spot? And -- or is it the general idea that just preserve your optionality in case the MLP equity markets ever come back?

Yes. Good question. But we continue to see, I think, good value in the partnership in its position today. And the extension of this agreement is actually very much as was originally envisioned back in 2014 when we constructed the partnership and launched that into the marketplace. It was designed to have an ability to extend that contract yearly year after year as the end of that 12-year contract expires, which is the end of '26. So renewing that contract or moving forward with that is reflective of the original construct of that ethylene sales agreement that was originally put to place in 2014. If you look at the way the contract for the ethylene sales agreement is constructed today, actually, we're very close to that $0.10 margin already. So there's really no give up on either side of the equation. The C-corp as well as the partnership are getting in effect market pricing in today's market. And so if you look at cash margin, that's really not how the agreement is structured. It's really on a fully loaded basis. And so that's really where the market is today, and that's why both the C-corp and the partnership have agreed to extend this contract.

Our next question comes from the line of Arun Viswanathan of RBC Capital Markets.

So I guess just going back to caustic, you noted that caustic is well supplied, and you don't expect a price increase, or I don't know if that's what you said. But I guess I was under the impression that maybe there was a $50 increase announced, and you could get maybe $20 of that in the coming months. Maybe you can just elaborate on what you're seeing there in caustic soda.

Yes. And so Arun, there -- as I said, the market is well supplied. If you look at where the consultants are with their forecast for prices, they do have nominated in their forecast price increases. And this is the time of year where you see a curtailment of chlorine production as we reach a slowing season in construction, which impacts PVC slowing just because of the seasonality. So there is normally a slowdown in the production of chlorine and therefore, caustic soda production, which is the basis behind their driver for the price increase. And whether it be one consultant or another, they have roughly $25 a ton in their forecast. And so my comment really was that the market simply is well supplied. And to the extent there are opportunities to improve pricing, we'll certainly act on those.

Our next question comes from the line of Kevin McCarthy of Vertical Research Partners.

With epoxy resins having been removed from Annex II, would you provide an update on how you see that market unfolding over the next several quarters?

Yes, Kevin, it's -- with our shuttering of the Pernis facility in Europe and our ability to source feedstocks, both LER and BPA in a very cost-effective manner, our downstream businesses are beginning to perform much better with that lower cost input feedstock. And so our European and North American and Asian businesses in epoxy are expected to continue to perform well. The challenge we had in our epoxy business simply was the fact that we had higher cost of production in Europe. So as we see the market today, I see some improvement in overall epoxy pricing. But I'd say our focus these days is very much in the downstream formulated aspects of the epoxy business that we have in Europe, in the Americas as well as in Asia.

And then as a follow-up or clarification, when exactly will the $100 million of goodness related to the Pernis closure begin to flow through? Does that happen in the first quarter? Or how would you characterize that?

Yes. So the losses that we were incurring there, the plant has been shuttered and we're in the process of bringing the unit down or brought the unit down safely in the third quarter. So the benefits that we're beginning to see are beginning to accrue in Q4 and forward into 2026. So of course, there'll be some severance costs and such that you'll see flow through, but the benefit that we're seeing to the bottom line will begin to come through in Q4 and into '26.

Our next question comes from the line of Michael Sison of Wells Fargo.

Just curious, I think I understand some of the pluses for 2026. But if demand stays in the trough, which a lot of companies have said they haven't seen evidence that we're going to pick back up anytime soon. You noted polyethylene, PVC, caustic, chlorine are both oversupplied, and it feels like feedstock costs could go higher. So do you think margins -- industry margins for PEM could go lower in '26 given that scenario?

It's really hard to make that call, Mike. When you think about the market that we see today, the outlook we see, and I'm looking at outlooks for -- from the consultants on pricing, pricing remains fairly stable. If you look at the average prices, one of the better-known consultants for '25 and compare that to their forecast for 2026, it's basically flat for the course of '26 versus the year 2025. Certainly, we have -- and Jean-Marc made comment about this, our feedstock costs have certainly risen. And so you're seeing some higher costs for ethane. And so there could be some further compression. But of course, that ethane is going into derivatives downstream. So if those derivatives downstream can't support that higher feedstock, then higher prices may not fully materialize in ethane. But I would say, as we look forward, we're certainly looking at our customer demand picture and also looking at what our customers are saying and how we operate the business. But I would say the consultants suggest that prices should be relatively flat from '25 to '26 in the chlorovinyls business.

At this time, the Q&A session has now ended. Are there any closing remarks?

Yes. Thank you again for participating in today's call. We hope you'll join us again for our next conference call to discuss our fourth quarter 2025 results.

Thank you for participating in today's Westlake Corporation Third Quarter Earnings Conference Call. As a reminder, this call will be available for replay beginning 2 hours after the call has ended. The replay can be accessed via Westlake's website. Goodbye.