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Investing.com -- Moody’s Ratings has affirmed Westlake Corporation’s Baa2 senior unsecured ratings while changing the outlook to stable from positive, citing weaker than expected performance in 2025.
The rating agency noted that Westlake’s Performance & Essential Materials (PEM) business has seen its EBITDA decline by over 80% through the first three quarters of 2025. This significant drop was attributed to higher feedstock and energy costs, lower selling prices, and weaker demand.
The company’s Housing & Infrastructure Products (HIP) business performed better, with a more modest 20% decline in EBITDA while maintaining margins above 20%.
As of September 30, 2025, Westlake’s Debt/EBITDA ratio stands at approximately 4.5x, with Retained Cash Flow/Debt at 11%. The company’s substantial cash balance improves these metrics on a net debt basis to 3.0x and 17%, respectively.
Moody’s highlighted Westlake’s strong liquidity profile, supported by approximately $2.2 billion in cash and full availability under its $1.5 billion revolving credit facility that matures in June 2027.
The stable outlook reflects expectations for modest profitability improvement in 2026, driven by cost-cutting measures implemented in 2025 and limited improvement in U.S. end market demand. However, Moody’s warned that if leverage remains above 3.5x through the first half of 2026, there could be further pressure on the outlook and ratings.
Factors that could lead to a rating downgrade include sustained adjusted financial leverage above 2.5x over most of the cycle or above 3.5x for more than a few quarters during an industry downturn. An upgrade would require sustained adjusted financial leverage below 2.0x and retained cash flow-to-debt consistently above 30%.
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