LyondellBasell Industries N.V. is a global chemical company engaged in the production and marketing of chemicals, plastics, and refining products across the petrochemical value chain. The company operates through six segments, offering a diverse range of products including olefins, polyolefins, propylene oxide, and refined products . LyondellBasell's strategic operations and product lines enable it to maintain a strong presence in the global chemical industry .
- Refining - Processes crude oil into refined products like gasoline and distillates, significantly contributing to the company's revenue.
- Olefins and Polyolefins-Americas (O&P-Americas) - Produces and markets olefins, co-products, polyethylene, and polypropylene, with polyethylene and polypropylene being major contributors to consolidated revenues.
- Olefins and Polyolefins-Europe, Asia, International (O&P-EAI) - Engages in the production and marketing of olefins, co-products, polyethylene, and polypropylene across Europe, Asia, and international markets.
- Intermediates and Derivatives (I&D) - Produces propylene oxide and derivatives, oxyfuels, and intermediate chemicals, with oxyfuels and related products contributing to consolidated revenues.
- Advanced Polymer Solutions (APS) - Focuses on compounding and solutions, including polypropylene compounds and engineered plastics.
- Technology - Develops and licenses chemical and polyolefin process technologies and manufactures polyolefin catalysts.
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What went well
- LYB's Intermediates and Derivatives segment is expected to remain steady, with the new PO/TBA facility operating better than planned rates, positioning the company well for potential upside when durable goods demand recovers.
- LYB continues to generate strong free cash flow, with a total capital return yield of 6% in Q2, and remains committed to returning 70% of free cash flow to shareholders through increased dividends and share buybacks.
- LYB anticipates improved earnings in the second half of the year, supported by expected polyethylene price increases due to strong market momentum, cheap ethane prices, and the absorption of new capacity through demand growth and record exports.
What went wrong
- LYB's current cost-advantaged operations represent only 60% of production volume, meaning 40% of production is in higher-cost regions, which could impact profitability.
- The company relies on favorable co-product values, especially in butadiene, to optimize its European crackers, suggesting possible challenges with core ethylene margins.
- LYB's plan to increase cost-advantaged production to 70% after implementing a European strategic assessment indicates potential issues with the remaining 30% of production, highlighting uncertainties in European operations.
Q&A Summary
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Cash Flow and Capital Return
Q: What's the outlook for buybacks and cash uses?
A: LyondellBasell generated $4.4 billion in free cash flow over the last 12 months, converting 95% of EBITDA to cash, surpassing their 80% target. In Q2, they increased dividends and resumed some buybacks. For the second half, buybacks will continue modestly as they remain cautious. Long-term, they are committed to returning 70% of free cash flow to investors. -
European Asset Review
Q: What's the plan for European assets—sell, upgrade, or rationalize?
A: LyondellBasell is evaluating all options for their European assets, including potential divestitures or rationalizations. They have announced this publicly, allowing discussions with potential buyers. The review includes both their POSM units (a 50-50 joint venture with Covestro) and cracker/PE/PP sites. They are progressing well, staying diligent and laser-focused, without delaying necessary actions. -
Polyethylene Price Outlook
Q: What PE price increases are expected in the second half?
A: They expect ethane to remain cheap, and there are two $0.05 per pound North American polyethylene price increases in the market. Practically all increased capacity has been absorbed through demand growth and record exports. With no inventory buildup and the hurricane season just beginning, they anticipate good momentum to support PE price increases. -
PO/TBA Plant and Market
Q: How is the new PO/TBA plant performing and PO demand outlook?
A: The new PO/TBA plant in Channelview operated at close to 90% capacity during Q2, a significant success for such a major investment ramping up quickly. Overall PO demand remains modest, with no noticeable rebound from durables, and they don't expect a rebound in the second half. China's ban on chlorohydrin-based PO technology by end of 2025 may offset new capacity additions. -
I&D Business Profitability
Q: Is the recent EBITDA bump in I&D sustainable?
A: Despite challenges in durable demand, the I&D segment remains steady. The new PO/TBA plant is running better than planned rates, close to benchmark. With interest rates potentially coming down, they see potential upside not currently built into forecasts. -
Demand Momentum and Maintenance
Q: What's affecting second half momentum compared to Q2?
A: They continue to see momentum building, with US domestic PE demand in Q2 up 4% vs Q1—the strongest quarter in two years. Exports were up around 8–9% vs May and June, reaching record levels. While awaiting inflation and interest rates to decline, they see improvements in areas like rigid packaging. Capacity utilization is affected mainly by scheduled turnarounds, not demand concerns. -
Refinery Closure and Circular Products
Q: Are refinery plans contingent on DOE funding, and what's in the $1B EBITDA target?
A: LyondellBasell plans to shut down the refinery by the end of Q1 2025. They are progressing with projects like MoReTec investments and renewable hydrocarbons, leveraging existing equipment to produce feedstock for their crackers. Some hydrogen projects are challenged without subsidies, but overall, they are making good progress. -
Polypropylene Dynamics
Q: How are you viewing global PP supply and feedstock costs?
A: US domestic PP demand was up 5% vs Q1, the strongest quarter since Q3 2021. PP is a more regional market than PE, with exports only 8–10% vs 40–50% for PE. The regional dynamic is influenced by propylene feedstock costs and supply reliability, particularly with on-purpose PDH units. Significant growth in China has made PP markets more regional. -
Circular Plastics and 2030 Targets
Q: Do issues with circular plastics initiatives raise concerns for 2030 targets?
A: LyondellBasell's MoReTec technology is different, being a catalytic process leveraging their expertise in catalysis. They have a unit operational in Ferrara and are progressing well with investments in Wesseling. They are confident in their technology and experience. -
Feedstock Optimization
Q: Did attractive naphtha co-product values influence feedstock choices?
A: Yes, they ran at 60% naphtha in EAI due to very good co-product values, especially in butadiene. This was considered the best optimization for their European crackers at the time. They continually optimize their feedstock slate week-to-week to produce the best value.
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You mentioned that shutting down the Houston refinery by no later than the end of the first quarter of 2025 will expand your average EBITDA margin by about 4 percentage points . How do you plan to offset the loss of revenue from the refinery operations and ensure sustainable profitability during this transition?
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With only 13% of your global capacity in the European assets under strategic review , what specific criteria are you using to decide whether to divest or rationalize these assets, and how will this reshape your presence in the European market?
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Despite the positive contributions from the new PO/TBA facility, you are idling PO11 due to current demand in the region . How do you plan to manage capacity utilization in the I&D segment if durable goods demand remains soft, and what are your strategies to maintain profitability?
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You have unlocked nearly one-third of your goal to add $3 billion in incremental normalized EBITDA by 2027 during 2023 . Can you provide more details on the specific initiatives and investments that will drive the remaining two-thirds, particularly in the face of challenging market conditions?
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The impact of Hurricane Beryl is estimated to reduce third-quarter EBITDA by approximately $65 million, with 75% in your O&P-Americas segment . Given the increasing risk of such weather events, what measures are you taking to mitigate future operational disruptions and financial impacts?
Q3 2024 Earnings Call
- Issued Period: Q3 2024
- Guided Period: N/A (The documents do not provide specific guidance from the Q3 2024 earnings call)
Q2 2024 Earnings Call
- Issued Period: Q2 2024
- Guided Period: Q3 2024
- Guidance:
- EBITDA Impact from Hurricane Beryl: Expected impact of approximately $65 million, with about 75% in the O&P-Americas segment .
- Operating Rates:
- 85% for North American olefins and polyolefin assets .
- 80% for European olefins and polyolefin assets .
- 75% for intermediates and derivative assets .
- Cash Flow and Capital Return: Target of returning 70% of free cash flow to investors, with modest share buybacks planned .
- Value Enhancement Program (VEP): Contribution of approximately $400 million to EBITDA in 2024 .
- Maintenance: Planned maintenance at Bayport PO/TBA assets .
- Technology Segment: Results expected to be similar to Q1, with increased revenue from licensing milestones and high catalyst volumes .
- Refining Segment: Operating at approximately 90% of capacity .
- Polyolefins Demand: Anticipated seasonal demand strength with low feedstock and energy costs .
Q1 2024 Earnings Call
- Issued Period: Q1 2024
- Guided Period: Q2 2024
- Guidance:
- Operating Rates:
- 85% for global olefins and polyolefins assets .
- 80% for intermediates and derivative assets .
- Planned Maintenance Impact: Estimated EBITDA impact of $30 million .
- Ethylene Oxide Derivatives Business Sale: Expected book gain of $275 million .
- Refinery Operations: Operating at approximately 95% of capacity .
- Technology Segment: Results expected to be similar or slightly better than Q4 2023 .
- Market Outlook: Anticipated seasonal improvements and stable to lower interest rates .
- Operating Rates:
Q4 2023 Earnings Call
- Issued Period: Q4 2023
- Guided Period: FY 2024
- Guidance:
- Effective Tax Rate: Approximately 20% .
- Capital Expenditures (CapEx): Approximately $2.1 billion, with $800 million for growth projects and $1.3 billion for sustaining investments .
- Capacity Utilization:
- 80% for Olefins and Polyolefins Americas .
- 75% for European assets .
- 75% for Intermediates and Derivatives .
- 80% for Refining .
- Value Enhancement Program (VEP): Exit run rate of $600 million in 2024, targeting up to $1 billion by 2025 .
- Dividend and Shareholder Returns: Commitment to returning 70% of free cash flow to shareholders .
Competitors mentioned in the company's latest 10K filing.
- Major integrated oil companies, refineries owned or controlled by foreign governments, and independent domestic refiners .
- Multinational chemical and refining companies, as well as some regional marketers and producers .
Recent developments and announcements about LYB.
Corporate Leadership
Leadership Change
Michael McMurray is retiring as CFO of LyondellBasell effective March 1, 2025. He will be succeeded by Agustin Izquierdo, currently the Senior Vice President, Olefins & Polyolefins Americas & Refining. McMurray will continue in an advisory role until his full retirement in March 2026. Izquierdo's extensive experience at BASF and Morgan Stanley positions him well for this role .
CFO Change
Michael McMurray, the current Chief Financial Officer (CFO) of LyondellBasell Industries N.V., will retire effective March 1, 2025. Agustin Izquierdo has been appointed as his successor and will assume the role of Executive Vice President and CFO on the same date. McMurray will continue in an advisory role until his full retirement in March 2026 .