Westlake Chemical Partners LP (WLKP): Business Model Canvas [11-2024 Updated]

Westlake Chemical Partners LP (WLKP) operates with a strategic and well-defined business model that emphasizes partnerships, efficiency, and reliability. At the core of their operations is a robust framework that includes essential elements such as key partnerships with Westlake Corporation, a commitment to producing ethylene, and a focus on long-term customer relationships. Discover how WLKP's unique approach to value propositions, cost structure, and revenue streams positions them for sustained growth and stability in the competitive chemical industry.

Westlake Chemical Partners LP (WLKP) - Business Model: Key Partnerships

Westlake Corporation as the primary partner

Westlake Chemical Partners LP (WLKP) relies heavily on its relationship with Westlake Corporation, which serves as its primary partner. For the three months ended September 30, 2024, sales to Westlake accounted for approximately 77.9% of the Partnership's net sales, totaling $215.8 million. For the nine months ended September 30, 2024, this figure increased to about 81.6% of total net sales, equating to $690.5 million. This significant dependence underscores the critical nature of their partnership for WLKP's revenue generation.

Suppliers of feedstock and natural gas

WLKP sources its feedstock primarily from Westlake, which includes ethane and other hydrocarbons essential for ethylene production. In the third quarter of 2024, feedstock purchases from Westlake amounted to $65.1 million, down from $120.0 million in the same quarter of 2023. Over the first nine months of 2024, feedstock costs totaled $220.6 million, compared to $303.8 million for the same period in 2023. The fluctuation in costs is influenced by market prices and operational efficiencies, which are critical for maintaining profitability amidst volatile commodity prices.

Logistics partners for transportation needs

Efficient logistics are vital for WLKP to transport its products to customers and receive feedstock. The Partnership has established relationships with various logistics providers, ensuring timely delivery and reduced transportation costs. While specific financial figures for logistics partnerships were not disclosed, the overall cost of sales for the nine months ended September 30, 2024, was $525.5 million, reflecting the combined costs of feedstock, logistics, and other operational expenses. Effective logistics management is essential for optimizing the supply chain and reducing operational risks.

Regulatory agencies for compliance

WLKP operates in a heavily regulated industry, requiring compliance with environmental and safety regulations. The Partnership engages with multiple regulatory agencies to ensure adherence to laws such as the Clean Air Act and the Resource Conservation and Recovery Act. The potential costs associated with compliance are substantial, although specific financial impacts were not quantified in the latest reports. However, legal and compliance costs are embedded within the $21.9 million allocated for selling, general, and administrative expenses during the nine months ended September 30, 2024. This collaboration with regulatory bodies is crucial for mitigating risks related to environmental liabilities and operational disruptions.

Key Partnership Element	Details	Financial Impact (Q3 2024)
Westlake Corporation	Primary partner for sales and feedstock supply	Sales: $215.8 million (77.9% of total sales)
Feedstock Suppliers	Primarily ethane sourced from Westlake	Feedstock Purchases: $65.1 million
Logistics Partners	Providers for transportation of products and feedstock	Cost of Sales: $525.5 million (includes logistics costs)
Regulatory Agencies	Compliance with environmental regulations	Compliance Costs: Included in $21.9 million SG&A

Westlake Chemical Partners LP (WLKP) - Business Model: Key Activities

Ethylene production through OpCo

Westlake Chemical Partners LP operates through its operating subsidiary, OpCo, which is heavily focused on the production of ethylene. As of September 30, 2024, the total net sales for WLKP were $845.8 million, with ethylene sales contributing significantly to this figure. For the third quarter of 2024, net sales from ethylene production were reported at $276.995 million, down from $321.664 million in the same quarter of 2023.

Managing operational efficiencies and costs

Operational efficiencies are critical for WLKP. In the nine months ended September 30, 2024, the gross profit margin increased to 37.9%, compared to 32.1% in the same period of 2023, primarily due to lower ethane feedstock costs and natural gas prices. The income from operations also saw an increase, reaching $298.4 million for the nine months ended September 30, 2024, compared to $264.9 million in the prior year.

Conducting maintenance and turnaround activities

Maintenance and turnaround activities play a vital role in WLKP's production strategy. The partnership postponed a previously planned maintenance turnaround at the Petro 1 facility from Q3 2024 to Q1 2025, which is expected to affect production levels. The total capital expenditures for maintenance and expansion projects were reported at $35.5 million for the nine months ended September 30, 2024.

Sales and distribution of ethylene and co-products

Sales of ethylene and co-products are key activities for WLKP. For the nine months ended September 30, 2024, WLKP reported net sales of ethylene to Westlake at $690.535 million, a decrease from $771.349 million in the same period in 2023. The partnership's total net sales for the third quarter of 2024 included $61.196 million from net co-products, marking an increase from $32.361 million in the third quarter of 2023.

Activity	Q3 2024 Performance	Q3 2023 Performance	Change (%)
Net Sales	$276.995 million	$321.664 million	-13.9%
Gross Profit Margin	42.2%	28.9%	+13.3%
Income from Operations	$109.689 million	$86.240 million	+27.2%
Capital Expenditures	$35.5 million	$34.0 million	+4.4%

In summary, WLKP's key activities revolve around efficient ethylene production, cost management, regular maintenance, and effective sales strategies, which collectively contribute to its overall business model and financial performance.

Westlake Chemical Partners LP (WLKP) - Business Model: Key Resources

22.8% Limited Partner Interest in OpCo

Westlake Chemical Partners LP holds a 22.8% limited partner interest in its operating subsidiary, Westlake Chemical OpCo LP (OpCo). This stake is crucial as it allows WLKP to participate in the operational and financial performance of OpCo, which is primarily engaged in the production of ethylene and its co-products.

Ethylene Production Facilities in Louisiana and Kentucky

WLKP operates significant ethylene production facilities located in:

• Calvert City, Kentucky
• Lake Charles, Louisiana

The combined production capacity of these facilities contributes substantially to WLKP's revenue stream. In the nine months ended September 30, 2024, the total net sales from ethylene and co-products amounted to $845.8 million, with a gross profit of $320.4 million, reflecting a gross profit margin of 37.9%.

Longview Pipeline for Transportation

The Longview Pipeline is a critical asset for WLKP, facilitating the transportation of ethylene from production facilities to various distribution points. This pipeline enhances operational efficiency and reduces transportation costs, contributing to the overall profitability of WLKP. In the nine months ended September 30, 2024, WLKP reported operational income of $298.4 million, which underscores the importance of efficient logistics in its business model.

Skilled Workforce and Management Team

WLKP benefits from a highly skilled workforce and an experienced management team. This human capital is vital for maintaining operational excellence and driving innovation within the company. The partnership's workforce is engaged in various aspects of production, safety, and compliance, ensuring that the facilities operate efficiently and meet regulatory standards. As of September 30, 2024, WLKP's operating cash flow was reported at $352.5 million, indicating strong operational capabilities supported by its workforce.

Key Resource	Description	Financial Impact
Limited Partner Interest in OpCo	22.8% stake in OpCo, allowing participation in profits	Net income attributable to WLKP for Q3 2024: $18.1 million
Ethylene Production Facilities	Facilities in Louisiana and Kentucky for ethylene production	Net sales of $845.8 million for 9 months ended September 30, 2024
Longview Pipeline	Pipeline for efficient transportation of ethylene	Operational income of $298.4 million for 9 months ended September 30, 2024
Skilled Workforce	Experienced team in production and management	Operating cash flow of $352.5 million for 9 months ended September 30, 2024

Westlake Chemical Partners LP (WLKP) - Business Model: Value Propositions

Reliable supply of ethylene and co-products

Westlake Chemical Partners LP ensures a consistent supply of ethylene and its co-products, which are essential for various industrial applications. The company reported net sales of $845.8 million for the nine months ended September 30, 2024, with significant contributions from ethylene and co-products sales volumes.

Competitive pricing due to efficient production

Westlake's operational efficiency allows it to maintain competitive pricing in the market. As of the third quarter of 2024, the gross profit margin was 42.2%, an increase from 28.9% in the third quarter of 2023. This improvement is attributed to lower feedstock costs, particularly a 46.8% decrease in ethane prices.

Long-term contracts with Westlake ensure stability

The partnership benefits from long-term contracts with Westlake, which provide a stable revenue base. For the nine months ended September 30, 2024, net income attributable to Westlake Chemical Partners LP was $47.4 million, compared to $40.0 million for the same period in 2023.

Commitment to safety and environmental standards

Westlake Chemical Partners LP maintains a strong commitment to safety and environmental standards. The company is subject to various environmental regulations and has taken measures to ensure compliance. In the nine months ended September 30, 2024, total capital expenditures related to safety and environmental projects were part of the $35.5 million spent on capital projects.

Financial Metric	Q3 2024	Q3 2023	9M 2024	9M 2023
Net Sales	$277.0 million	$321.7 million	$845.8 million	$893.5 million
Net Income	$104.1 million	$80.9 million	$281.8 million	$247.6 million
Gross Profit Margin	42.2%	28.9%	37.9%	32.1%
EBITDA	$139.1 million	$115.7 million	$386.8 million	$349.9 million

Westlake Chemical Partners LP (WLKP) - Business Model: Customer Relationships

Long-term agreements with Westlake

Westlake Chemical Partners LP maintains strategic long-term agreements with its parent company, Westlake Chemical Corporation, which significantly contributes to its revenue stream. For the nine months ending September 30, 2024, net sales to Westlake amounted to $690.5 million, compared to $771.3 million during the same period in 2023, reflecting a decrease due to lower ethylene sales prices. The partnership benefits from secured pricing and demand through these agreements, ensuring stable cash flow and operational efficiency.

Regular communication to ensure alignment

Regular communication is pivotal in maintaining alignment between Westlake Chemical Partners LP and Westlake Chemical Corporation. This includes ongoing discussions about pricing adjustments, supply chain logistics, and market conditions. In the third quarter of 2024, the company reported an increase in net income to $104.1 million on net sales of $277.0 million, indicating effective communication strategies that align operational goals with market realities. Through structured communication channels, both entities can swiftly adapt to changes in the market environment, ensuring that operational strategies remain synchronized.

Customer support for third-party sales

Westlake Chemical Partners LP provides robust customer support for its third-party sales, enhancing customer satisfaction and loyalty. The company reported net co-products and other sales to third parties totaling $155.3 million for the nine months ended September 30, 2024, compared to $122.2 million in the previous year, marking a significant increase. This growth can be attributed to improved customer support initiatives, including tailored service offerings and responsiveness to customer needs, which have fostered stronger relationships with third-party buyers.

Focus on relationship management for repeat business

The focus on relationship management is central to Westlake Chemical Partners LP's strategy for securing repeat business. The company emphasizes developing long-term relationships with both its parent company and third-party customers. For the nine months ended September 30, 2024, the gross profit margin increased to 37.9%, up from 32.1% the previous year, which reflects effective relationship management leading to higher sales volumes and improved pricing power. The partnership’s ability to maintain high levels of customer satisfaction has been instrumental in driving repeat business, as evidenced by the significant revenue generated from established customer relationships.

Metric	Q3 2024	Q3 2023	9M 2024	9M 2023
Net Sales to Westlake	$215.8 million	$289.3 million	$690.5 million	$771.3 million
Net Co-products Sales to Third Parties	$61.2 million	$32.4 million	$155.3 million	$122.2 million
Gross Profit Margin	42.2%	28.9%	37.9%	32.1%
Net Income	$104.1 million	$80.9 million	$281.8 million	$247.6 million

Westlake Chemical Partners LP (WLKP) - Business Model: Channels

Direct sales to Westlake Corporation

Westlake Chemical Partners LP (WLKP) engages in substantial direct sales to its parent company, Westlake Corporation. For the third quarter of 2024, net sales to Westlake amounted to $215.8 million, a decrease from $289.3 million in the third quarter of 2023. This trend reflects a broader context where the Partnership’s sales to Westlake for the nine months ended September 30, 2024, totaled $690.5 million, down from $771.3 million for the same period in 2023.

Third-party sales through various distributors

In addition to direct sales to Westlake, WLKP distributes its products through various third-party distributors. For the third quarter of 2024, the net sales from co-products, ethylene, and other sales to third parties were $61.2 million, an increase from $32.4 million in the third quarter of 2023. Over the nine months ending September 30, 2024, sales to third parties reached $155.3 million, compared to $122.2 million in the previous year.

Online platforms for investor relations

WLKP utilizes online platforms for investor relations, providing stakeholders with access to financial reports, press releases, and other relevant information. As of September 30, 2024, the Partnership had cash and cash equivalents totaling $60.2 million, with an additional $109.5 million invested under the Investment Management Agreement, reflecting the Partnership's commitment to transparency and engagement with investors.

Trade shows and industry events for visibility

Participation in trade shows and industry events is integral for WLKP to enhance visibility and strengthen relationships within the industry. These events allow WLKP to showcase its products and innovations, engage with potential customers, and maintain its competitive edge in the market. However, specific financial impacts from these engagements are not directly quantified in the available reports.

Sales Channel	Q3 2024 Net Sales ($ Million)	Q3 2023 Net Sales ($ Million)	9M 2024 Net Sales ($ Million)	9M 2023 Net Sales ($ Million)
Direct Sales to Westlake	215.8	289.3	690.5	771.3
Sales to Third Parties	61.2	32.4	155.3	122.2
Total Net Sales	277.0	321.7	845.8	893.5

Westlake Chemical Partners LP (WLKP) - Business Model: Customer Segments

Westlake Corporation as the primary customer

Westlake Chemical Partners LP generates a significant portion of its revenue from sales to Westlake Corporation, its primary customer. For the nine months ended September 30, 2024, net sales to Westlake amounted to $690.5 million, down from $771.3 million in the same period of 2023. In the third quarter of 2024, net sales to Westlake were $215.8 million, compared to $289.3 million in the third quarter of 2023.

Other chemical manufacturers for co-products

Westlake Chemical Partners also sells co-products to various chemical manufacturers. In the nine months ended September 30, 2024, sales of ethylene and other co-products to third parties totaled $155.3 million, up from $122.2 million in the same period of 2023. For the third quarter of 2024, net co-product sales were $61.2 million, significantly higher than $32.4 million during the same quarter in 2023.

Investors interested in partnership performance

Investors are a key customer segment for Westlake Chemical Partners, as they seek reliable returns through distributions. For the nine months ended September 30, 2024, the Partnership declared distributions totaling $49.8 million, matching the amount declared in the same period of 2023. The net income attributable to the Partnership for the nine months ended September 30, 2024, was $47.4 million, compared to $40.0 million in 2023. The MLP distributable cash flow also increased to $51.9 million in 2024 from $46.2 million in 2023.

Regulatory bodies for compliance oversight

Regulatory bodies play a critical role in overseeing the operations of Westlake Chemical Partners. The Partnership is subject to various environmental laws and regulations that require compliance, impacting operational strategies and costs. The Partnership's financial statements reflect ongoing compliance with such regulations, which can incur significant costs and influence operational decisions. Compliance costs and potential liabilities are closely monitored, ensuring the Partnership adheres to regulatory requirements.

Customer Segment	Revenue (2024)	Revenue (2023)	Change (%)
Sales to Westlake Corporation	$690.5 million	$771.3 million	-10.4%
Co-products sales to third parties	$155.3 million	$122.2 million	27.1%
Distributions to investors	$49.8 million	$49.8 million	0%
Net income attributable to the Partnership	$47.4 million	$40.0 million	18.5%
MLP distributable cash flow	$51.9 million	$46.2 million	15.5%

Westlake Chemical Partners LP (WLKP) - Business Model: Cost Structure

Feedstock and natural gas costs

For the nine months ended September 30, 2024, Westlake Chemical Partners LP reported a significant decrease in feedstock costs. Specifically, the average price for ethane feedstock dropped by 46.8% compared to the previous year, and natural gas costs decreased by 18.5% during the same period. These reductions in feedstock and natural gas prices contributed to improved margins and overall profitability.

Labor and maintenance expenses

Labor expenses for the nine months ended September 30, 2024, amounted to approximately $21.9 million, consistent with the same period in 2023. Maintenance capital expenditures were reported at $34.8 million for the nine months ended September 30, 2024, slightly lower than $37.4 million in the prior year. The focus on efficiency and cost management has helped maintain labor costs despite operational challenges.

Capital expenditures for facility upkeep

Westlake Chemical Partners LP incurred total capital expenditures of $35.5 million in the nine months ended September 30, 2024, compared to $34.0 million in the same period of 2023. These expenditures were primarily targeted at enhancing production capacity and maintaining safety and environmental standards across facilities.

Capital Expenditures (in millions)	2024	2023
Total Capital Expenditures	$35.5	$34.0
Maintenance Capital Expenditures	$34.8	$37.4

Distribution and logistics costs

Distribution costs for the third quarter of 2024 were reported at $16.6 million, reflecting the logistical expenses associated with the delivery of products. The increase in distribution costs was influenced by higher freight rates and logistical challenges post-pandemic. Overall, the focus on optimizing supply chain efficiencies remains a priority for the partnership.

Westlake Chemical Partners LP (WLKP) - Business Model: Revenue Streams

Ethylene sales under long-term agreements

Westlake Chemical Partners LP primarily generates revenue through ethylene sales. For the nine months ended September 30, 2024, net sales from ethylene sold to Westlake totaled $690.5 million, a decrease from $771.3 million in the same period of 2023. The sales volume for ethylene to Westlake reflects a significant portion of their revenue stream, highlighting the importance of these long-term agreements.

Co-product sales from ethylene production

In addition to ethylene, Westlake also earns revenue from co-products generated during the ethylene production process. For the nine months ended September 30, 2024, net co-product sales amounted to $155.3 million, up from $122.2 million in the same period of 2023. This increase indicates a growing demand for co-products and contributes positively to the company's overall revenue.

Buyer deficiency fees from Westlake contracts

Westlake Chemical Partners LP also collects buyer deficiency fees under its contracts with Westlake. These fees are charged when Westlake does not meet its minimum purchase obligations. In the first nine months of 2024, the fee recognized was lower compared to previous periods, reflecting reduced buyer deficiency charges. This revenue stream is crucial for maintaining financial stability, particularly during periods of lower ethylene prices or sales volumes.

Potential future expansion projects generating additional revenue

Looking ahead, Westlake Chemical Partners LP is considering potential expansion projects that could further enhance revenue generation. While specific figures are not disclosed, the company is focusing on capital expenditures aimed at increasing production capacity. As of September 30, 2024, total capital expenditures for the year were approximately $35.5 million. These projects are expected to strengthen the revenue base by tapping into new markets and increasing overall production output.

Revenue Stream	Q3 2024 Revenue	Q3 2023 Revenue	YTD 2024 Revenue	YTD 2023 Revenue
Ethylene sales to Westlake	$215.8 million	$289.3 million	$690.5 million	$771.3 million
Co-product sales	$61.2 million	$32.4 million	$155.3 million	$122.2 million
Buyer deficiency fees	Data not specified	Data not specified	Lower compared to previous periods	Data not specified
Future expansion projects	Data not specified	Data not specified	$35.5 million (capital expenditures)	Data not specified

Updated on 16 Nov 2024

Resources:

1. Westlake Chemical Partners LP (WLKP) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Westlake Chemical Partners LP (WLKP)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Westlake Chemical Partners LP (WLKP)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.