Breaking Down Westlake Chemical Partners LP (WLKP) Financial Health: Key Insights for Investors

You need to look past the headline yield on Westlake Chemical Partners LP because the numbers tell a more nuanced story: while the quarterly distribution remains locked in at a steady $0.4714 per unit, the distribution coverage is flashing a warning sign that demands your attention.

Honestly, the 10.55% dividend yield is compelling, but the most recent Q3 2025 results showed the trailing twelve-month (TTM) distribution coverage ratio dropped to a concerning 0.75x, meaning the Partnership is paying out more than it's generating in distributable cash flow right now. This dip is largely tied to the planned Petro 1 turnaround, which crushed Q1 2025 net income down to just $4.9 million, but with that maintenance capital expenditure now behind them, the key question is how fast they can push that coverage ratio back toward 1.0x.

The good news is the fixed-margin Ethylene Sales Agreement (ESA) with Westlake Corporation provides a strong floor, helping to stabilize Q3 2025 net income at $14.7 million, but that TTM coverage still needs to recover quickly to justify the current unit price of around $18.20.

We need to defintely map out the path to coverage recovery.

Revenue Analysis

Westlake Chemical Partners LP (WLKP) revenue is remarkably predictable, largely insulated from volatile commodity prices due to its core business model. Your key takeaway is that the partnership's near-term annual revenue, based on the trailing twelve months (TTM) ending September 30, 2025, is approximately $1.13 billion, reflecting a modest year-over-year decline of -0.82%. That stability is the whole point of this structure.

Understanding Westlake Chemical Partners LP's Revenue Streams

The primary revenue source for Westlake Chemical Partners LP is not selling products on the open market, but rather a fixed-margin contract with its parent company, Westlake Chemical Corporation. This is what we call a fee-based revenue model in the Master Limited Partnership (MLP) structure, which is designed to provide stable, predictable cash flows to unitholders.

• Ethylene Sales Agreement (ESA): This is the dominant revenue driver, where the operating company (OpCo) sells a portion of its ethylene production to Westlake Chemical Corporation at a fixed margin, often reiterated at $0.10/lb.
• Segment Contribution: The revenue is essentially a single-segment contribution from the Olefins business, primarily ethylene production, with the fixed-margin structure minimizing exposure to raw material and product price swings.
• Geographic Focus: The revenue is generated from US-based production facilities, specifically the ethylene units in Lake Charles, Louisiana, and Calvert City, Kentucky.

Near-Term Revenue Trends and Growth

While the business model is inherently stable, the near-term revenue trend for 2025 shows a slight contraction, mostly due to operational timing. The TTM revenue ending Q3 2025 was $1.13 billion, a -0.82% decrease from the prior TTM period. Here's the quick math on the quarterly figures, which shows the impact of planned maintenance:

The year-over-year revenue growth rate for the TTM period is -0.82%. To be fair, this small decline is largely a function of the planned, but extended, turnaround at the Petro One Ethylene unit in Lake Charles during the first half of 2025. If you smooth out that planned downtime, the underlying revenue from the fixed-margin contract is defintely steady.

Analysis of Significant Revenue Changes

The most significant change in the 2025 revenue profile was the planned maintenance, not a shift in the core business strategy. The lower Q1 and Q2 production volumes temporarily reduced the amount of ethylene sold to the parent company, impacting the top line. This is a temporary headwind, not a structural problem, especially since there are no further planned turnarounds in 2025 or 2026. Plus, the partnership renewed a key ethylene sales agreement through 2027, which solidifies the revenue floor for the next couple of years. This stability is the core of the investment thesis. For a deeper dive into the partnership's valuation, read our full report: Breaking Down Westlake Chemical Partners LP (WLKP) Financial Health: Key Insights for Investors.

Next Step: Portfolio Manager: Assess what a -0.82% TTM revenue change means for your distribution coverage ratio assumptions by end-of-year.

Profitability Metrics

You want to know if Westlake Chemical Partners LP (WLKP) is a profitable machine or just a well-managed utility. The short answer is that its unique structure-a Master Limited Partnership (MLP) with a fixed-margin contract-makes its profitability look very different from a standard chemical company, but the core stability is undeniable.

For the unitholder, the key is the Net Profit Attributable to the Partnership. In the third quarter of 2025, that figure was a stable $15 million, translating to a Net Profit Margin of about 4.8% on consolidated revenue. This margin is low compared to a high-growth tech firm, but it's a deliberate feature of their business model, not a bug.

Gross, Operating, and Net Margins in 2025

To understand the Partnership's profitability, you need to look at the operating company (OpCo) that generates the cash flow. The OpCo's consolidated net sales for Q3 2025 were approximately $309 million. Here's the quick math on the key margins:

• Gross Profit Margin: Approximately 32.2% (based on Q3 2025 consolidated figures). This is the OpCo's margin before operating expenses.
• Operating Profit Margin (EBIT Margin): This is high for the OpCo, but the Partnership's structure means most of that profit is paid up to its parent, Westlake Corporation, under a long-term ethylene sales agreement.
• Net Profit Margin (Attributable to the Partnership): A steady 4.8%. This is the slice of profit that flows down to the WLKP unitholders, designed for stability.

The stability of that 4.8% Net Margin is the whole story. It's insulated because roughly 95% of the OpCo's ethylene production is sold under a take-or-pay contract with Westlake Corporation at a fixed cash margin of $0.10 per pound.

Trends and Operational Efficiency

The biggest near-term trend for WLKP in 2025 was managing a major maintenance event. The planned turnaround at the Petro 1 ethylene unit was completed in the second quarter of 2025, which temporarily impacted cash flow. Cash flows from operating activities in Q3 2025 rebounded significantly to $105.2 million from a sharp dip in Q2 2025, showing that operational efficiency is quickly normalizing post-turnaround.

The fact that WLKP completed this major maintenance ahead of schedule and has no further turnarounds planned for the remainder of 2025 or 2026 is a clear sign of operational discipline. This proactive maintenance culture is what supports the long-term reliability of the fee-based cash flow. You can read more about this in Breaking Down Westlake Chemical Partners LP (WLKP) Financial Health: Key Insights for Investors.

Industry Comparison: Stability vs. Growth

When you compare WLKP's profitability metrics against the broader US Chemicals industry, you see the trade-off: stability for lower growth. The Partnership's low Net Margin of 4.8% is less about poor cost management and more about its structure as an MLP designed to pass cash flow to the parent company.

Still, let's look at the valuation side. The market is pricing in this stability with a much lower Price-to-Earnings (P/E) ratio. For the latest period, WLKP trades at a P/E of around 12.6x, which is significantly below the US Chemicals industry average P/E of 25.3x. This suggests the market sees WLKP as an income-focused asset, not a growth stock, and it trades at a discount to its peers.

The operational efficiency is strong, evidenced by the quick rebound in cash flow after the turnaround. The risk is not in cost control-the fixed-margin model handles that-but in the concentration of revenue with one customer, Westlake Corporation. Finance: Monitor the trailing twelve-month distribution coverage ratio, which should improve now that the $112.8 million in turnaround costs are behind them.

Debt vs. Equity Structure

You need to know how Westlake Chemical Partners LP (WLKP) funds its operations, because the mix of debt and equity tells you everything about its risk profile and growth capacity. The direct takeaway here is that the Partnership maintains a remarkably conservative capital structure, leaning heavily on equity and stable, long-term financing, which is a major strength in the cyclical chemical sector.

As of the third quarter of 2025, Westlake Chemical Partners LP's balance sheet shows a very low reliance on short-term obligations and a stable, manageable long-term debt load. Specifically, the Partnership's long-term debt has remained consistent at $400 million for the majority of the 2025 fiscal year, with virtually $0 million in short-term debt and capital lease obligations as of June 2025. Current liabilities, which include accounts payable and accrued expenses, were just $55.126 million as of September 30, 2025. This low short-term debt is defintely a good sign for near-term liquidity.

This conservative approach shines through in the leverage metrics. I calculate the Debt-to-Equity (D/E) ratio using the September 30, 2025, balance sheet figures (Long-Term Debt of $400 million divided by Total Equity of $813.311 million). Here's the quick math: the D/E ratio stands at approximately 0.49, or 49%.

That 0.49 ratio is a clear indicator of financial strength, especially when you compare it to the US Chemical industry average, which is around 0.85 as of November 2025. This means Westlake Chemical Partners LP is financing its assets with significantly more equity than its peers, insulating it from interest rate risk and economic downturns. It's a very low leverage profile for a capital-intensive Master Limited Partnership (MLP).

The Partnership's financing strategy is highly deliberate. The stable $400 million long-term debt has not seen any major refinancing or new issuances in 2025, and there has been no issuance of common units under the company's $50 million equity distribution program as of March 31, 2025. The company's core business model-which is built on a long-term, fixed-margin ethylene sales agreement with its parent, Westlake Corporation-provides highly predictable cash flows, allowing them to maintain this low leverage. They don't need to chase debt for growth because their cash flow is so reliable.

The company balances its funding by prioritizing cash flow from operations and maintaining a strong equity base, rather than relying on aggressive debt or dilutive equity issuances. This is why their consolidated leverage ratio is approximately 1x, which is considered very strong. This stability is the bedrock of their distribution policy. If you want to dive deeper into the full picture, you can read the full post here: Breaking Down Westlake Chemical Partners LP (WLKP) Financial Health: Key Insights for Investors.

• Long-Term Debt: $400 million (Q3 2025).
• Short-Term Debt: $0 million (Q2 2025).
• D/E Ratio (Q3 2025): 0.49 (Industry average: 0.85).
• Financing Strategy: Stable debt, no recent major issuances, and a reliance on fixed-margin cash flow for funding.

Liquidity and Solvency

You want to know if Westlake Chemical Partners LP (WLKP) has the cash to meet its short-term obligations, and the answer is a clear yes-their liquidity position is exceptionally strong, especially for a Master Limited Partnership (MLP). The key is the stability provided by their long-term sales agreement with Westlake Corporation.

Their quick ratios and current ratios tell the story of a rock-solid balance sheet. As of the Trailing Twelve Months (TTM) ending September 2025, Westlake Chemical Partners LP's Current Ratio stood at a very healthy 2.37, and the Quick Ratio was nearly identical at 2.32. A ratio over 1.0 is generally good, so these numbers mean the Partnership has over twice the current assets to cover its current liabilities, even without selling inventory. That's defintely a comfortable buffer.

Analysis of Working Capital and Ratios

The high liquidity ratios are a direct result of Westlake Chemical Partners LP's business model, which minimizes working capital (current assets minus current liabilities) needs. Their primary product, ethylene, is sold almost entirely to their parent company, Westlake Corporation, under a fixed-margin, fee-based arrangement. This setup reduces the risk of carrying large inventories or dealing with slow-paying customers, which is why the Quick Ratio is so close to the Current Ratio.

While the ratios are strong, the Net Current Asset Value (NCAV) on a TTM basis ending September 2025 was a negative $327.44 million. This isn't a red flag here; it's common for MLPs and utilities to have negative working capital because they operate with minimal receivables and inventory, but still have large current liabilities like distributions payable. What matters is the consistent, predictable cash flow to cover those liabilities.

• Current Ratio: 2.37x (TTM Sep 2025)
• Quick Ratio: 2.32x (TTM Sep 2025)
• Cash and Cash Investments: $51 million (Q3 2025 end)

Cash Flow Statements Overview

Cash flow is the lifeblood of an MLP, as it directly funds the distributions to unitholders. Westlake Chemical Partners LP's cash flow trends in 2025 were volatile but ultimately reassuring, showing a quick recovery after a planned maintenance event.

Here's the quick math on the cash flow components for the TTM ending September 2025 (in millions of USD):

The big story in 2025 was the planned Petro 1 turnaround in the second quarter. Cash flows from operating activities (CFO) plummeted to just $9.1 million in Q2 2025, down from a much higher run rate, due to significant cash payments for the maintenance. But, the business model proved its resilience: CFO rebounded sharply to $105.2 million in Q3 2025 after the turnaround was completed. This shows the temporary nature of the cash flow dip.

Near-Term Risks and Opportunities

The main liquidity concern for an MLP is the distribution coverage ratio, which measures the cash flow available for distribution against the actual distributions paid. For the second quarter of 2025, the trailing twelve-month coverage ratio dipped to 0.79x, which is below the critical 1.0x mark, primarily because of the high maintenance capital expenditures during the turnaround. This means the Partnership paid out more in distributions than it generated in distributable cash flow over that period. This is a short-term risk, but management expects the ratio to 'solidly improve' in the second half of 2025 as the turnaround costs fade.

The major strength is the stability of the long-term debt, which stands at $400 million, and the strong consolidated leverage ratio of approximately one time. This low leverage gives them plenty of financial flexibility. If you want a deeper dive into who is betting on this stability, you should be Exploring Westlake Chemical Partners LP (WLKP) Investor Profile: Who's Buying and Why?

Valuation Analysis

You want to know if Westlake Chemical Partners LP (WLKP) is a buy, a hold, or a sell right now, and the numbers point to a nuanced 'Hold' with a strong income tilt. The market is clearly discounting the stock, but the underlying cash flow remains robust enough to support the massive payout. This isn't a growth story; it's a yield play with real risks.

Here's the quick math on why Westlake Chemical Partners LP looks cheap on paper but is priced as a 'Hold' by most analysts. The valuation multiples for the latest twelve months (TTM) as of November 2025 are compellingly low, especially when compared to the broader market and even the Basic Materials sector.

• Price-to-Earnings (P/E) Ratio: The TTM P/E sits at 12.99. To be fair, this is significantly lower than the S&P 500's average, suggesting the stock is inexpensive based on its earnings.
• Price-to-Book (P/B) Ratio: At just 0.79, the stock is trading below its book value. This is defintely a classic sign of a potentially undervalued asset, but it often signals market skepticism about the quality or future earning power of those assets.
• Enterprise Value-to-EBITDA (EV/EBITDA): The latest TTM EV/EBITDA is approximately 3.0x. This multiple is very low for a stable infrastructure-like business, which is a major green flag for value investors.

The stock has had a rough 12 months, which explains the low multiples. Over the last year leading up to November 2025, the stock price has decreased by 20.44%. It's been trading near its 52-week low of $17.75, having fallen sharply from its 52-week high of $25.04. The closing price as of November 21, 2025, was $18.20. That kind of price action shows significant investor concern, likely tied to commodity price volatility and maintenance capital expenditure. You can dig deeper into the ownership structure and who is buying at Exploring Westlake Chemical Partners LP (WLKP) Investor Profile: Who's Buying and Why?

The Dividend Reality Check

The main draw here is the yield. Westlake Chemical Partners LP offers a massive dividend yield of about 10.5%. But you need to look past the headline number. The dividend payout ratio based on earnings is a high 135.00%, meaning the company is paying out more than it earns in net income. That's a red flag for sustainability.

What this estimate hides is the Master Limited Partnership (MLP) structure, which prioritizes cash flow. The good news is the cash payout ratio is much healthier at only 31.8%. This tells us the dividend is well-covered by actual cash flow from operations, which is what truly matters for an MLP. Still, that high earnings payout ratio is why Wall Street is cautious.

Analyst consensus reflects this mixed picture: the current average rating is a Hold. Analysts are essentially telling you to keep your units if you own them for the yield, but not to rush in and buy new ones, especially given the recent price decline. Your action here depends on your goal: for pure income, the cash flow coverage makes this a defensible position; for capital appreciation, the current market sentiment suggests you wait for a clearer turnaround signal.

Risk Factors

You need to know where the pressure points are, even with a stable Master Limited Partnership (MLP) like Westlake Chemical Partners LP (WLKP). The core of their business-ethylene production with a fixed-margin contract-is strong, but a few key risks surfaced in the 2025 fiscal year that demand attention. The biggest one is a classic financial tight spot: dividend coverage.

The most immediate concern is the financial sustainability of the distribution. While the company has maintained its quarterly distribution of $0.4714 per common unit, the math suggests this is a strain right now. For the third quarter of 2025, the dividend payout ratio stood at a high 135.00%. Here's the quick math: the trailing twelve-month distributable cash flow (DCF) coverage ratio dropped to just 0.75x, down from 0.79x in Q2 2025. This means the cash flow generated is not fully covering the distribution payments, which is a red flag for any income-focused investor. They need to rebuild that operating surplus, defintely.

• Financial Risk: Payout ratio of 135.00% signals distribution unsustainability.
• Operational Risk: Maintenance capital expenditures can crush quarterly DCF.
• External Risk: Global economic softness impacts the broader chemical market.

On the operational front, we saw the impact of necessary maintenance. The planned turnaround at the Petro 1 ethylene unit in Lake Charles, Louisiana, significantly reduced cash flow from operating activities in the second quarter of 2025, which fell by $112.8 million compared to the same period in 2024. This kind of event is a one-time hit, but it shows how sensitive the quarterly distributable cash flow (DCF) is to downtime. What this estimate hides is the timing of cash payments for these turnarounds, which can cause huge swings in quarterly cash flow.

Looking externally, Westlake Chemical Partners LP (WLKP) is not immune to macro trends, even with its fee-based model. Management has highlighted the risk of continued global economic softness, which affects overall demand in the chemical industry. Also, potential volatility in raw material prices, particularly ethane and propane, remains a risk. While their fixed-margin agreement with Westlake Corporation mitigates a lot of this commodity price exposure, the broader market conditions still influence their growth opportunities and the health of their primary customer.

The good news is the clear mitigation strategy. Their business is fundamentally anchored by a long-term, fixed margin ethylene sales agreement with Westlake Corporation, which insulates them from much of the commodity price swing that crushes competitors. Plus, the company has confirmed no planned turnarounds for the remainder of 2025 or 2026, which should stabilize cash flow and help the DCF coverage ratio recover. They also have a manageable long-term debt of $400 million. The key strategic action is executing on their growth levers, which include increasing their ownership interest in the operating company (OpCo) and negotiating higher fixed margins in future sales agreements, like the one already renewed through 2027. For a deeper dive into the company's valuation, check out our full report: Breaking Down Westlake Chemical Partners LP (WLKP) Financial Health: Key Insights for Investors.

Growth Opportunities

You're looking for stability and growth in a Master Limited Partnership (MLP), and Westlake Chemical Partners LP (WLKP) offers a unique, contractually-backed model that minimizes commodity price risk. The clear takeaway is that the company's growth hinges on four specific, manageable levers, not volatile market swings, so near-term risks are mostly operational, like the recently completed turnaround.

The core of Westlake Chemical Partners LP's competitive advantage is its fixed-margin ethylene sales agreement with Westlake Corporation. This agreement covers a massive 95% of OpCo's annual ethylene production, locking in a cash margin of $0.10 per pound. This structure provides predictable, stable cash flows, which is defintely a rare and powerful differentiator in the cyclical chemicals industry. This stability is why they've maintained 44 consecutive quarterly distributions.

Here's a quick look at the analyst consensus for the 2025 fiscal year, which reflects a steady operational outlook now that the Petro 1 turnaround is complete:

What this estimate hides is the impact of the major turnaround at the Lake Charles Petro 1 ethylene unit, which was completed ahead of schedule in Q2 2025. The good news is there are no further planned turnarounds in 2025 or 2026, so distributable cash flow (DCF) is expected to 'solidly improve' in the second half of 2025 as maintenance capital expenditures normalize.

Strategic Initiatives and Growth Levers

The company's growth strategy is simple: pull one of four levers to increase the stable cash flow stream. They aren't relying on a sudden spike in commodity prices, which is smart.

• Increase Ownership in OpCo: Buy a larger stake in the operating company to capture more of the fixed-margin cash flow.
• Acquire Qualified Income Streams: Purchase other assets that produce similar fee-based, predictable cash flows.
• Organic Growth: Expand current ethylene facilities to increase the volume of product sold under the fixed-margin contract.
• Negotiate Higher Fixed Margin: Work with Westlake Corporation to increase the $0.10 per pound margin in the sales agreement.

Also, Westlake Chemical Partners LP is quietly positioning itself for long-term growth by aligning with broader sustainability trends, including initiatives in composites recycling and expansion into sustainable materials. This strategic pivot helps position the company to benefit from the growing global green economy, even though the immediate financial impact is small. For a deeper dive into who is buying and why, you should check out Exploring Westlake Chemical Partners LP (WLKP) Investor Profile: Who's Buying and Why?

Your action here is to monitor the execution of these four levers. The most immediate opportunity for growth in 2025 is the normalization of production volumes now that the major maintenance is behind them. That's a clear, near-term catalyst you can track.