The operator welcomes everyone to the LyondellBasell Teleconference, which will be recorded for replay purposes. David Kinney, Head of Investor Relations, will lead the call and a slide presentation is available on the company's website. Forward-looking statements and non-GAAP financial measures will be discussed, but there are risks and uncertainties involved. The call will focus on the company's business results using non-GAAP measures, and CEO Peter Vanacker and other executives will also be joining the call.

LYB's second quarter results call will focus on updates on long-term strategy and market dynamics. Peter Vanacker, the speaker, begins by discussing the company's continued leadership in safety performance, with a record of consistently delivering industry-leading safety results. He also highlights the team's efforts to operate safely each day with zero incidents, injuries, or accidents. The second quarter saw a 30% improvement in underlying business results, driven by increased volumes and improved demand for polyolefins in North America. Feedstock and energy costs remain low.

LYB's European olefins and polyolefins results improved due to their flexibility in utilizing advantaged LPG feedstocks. The expansion of their PO/TBA capacity led to record oxyfuel sales volumes and earnings of $2.24 per share. LYB is focused on their three-pillar strategy to drive strategic growth and long-term value creation, with a goal of adding $3 billion in incremental normalized EBITDA by 2027. They are working to build a portfolio that focuses on leading market positions, attractive returns, and access to advantaged feedstocks. This will result in a more profitable and streamlined company. LYB's investment decisions are guided by their commitment to pursue attractive returns above their cost of capital and leverage their technology and global market positions for access to advantaged feedstocks.

The company is making progress in building a profitable circular and low-carbon solutions business, expanding their definition of advantaged feedstocks to include circular and renewable options. They have been busy with various actions, such as selling their EO&D business and acquiring a stake in the NATPET joint venture. They are also undergoing a strategic review of their European assets. The company's goals include simultaneously growing and upgrading their core businesses through investments and evaluating potential opportunities. Their value-enhancement program is delivering growth and becoming embedded in the company's culture. Upgrading their portfolio involves divesting or exiting non-core businesses, such as the Houston Refinery, which will ultimately improve their EBITDA margin.

LYB is undergoing a strategic review of its European assets in order to position itself for future markets and build a stronger and more profitable business portfolio. The company has determined that six assets in their current configuration do not meet its criteria for a core business and all options are being considered, including divestiture or rationalization. However, the impact on the company's global portfolio is limited and LYB will continue to have a strong presence in Europe, particularly in its core assets and technology segment. The company will also maintain productive engagement with stakeholders at the impacted sites.

LyondellBasell has demonstrated strong cash generation, with $4.4 billion in cash from operating activities and a 95% cash conversion rate in the past year. They have returned almost $1.8 billion to shareholders through dividends and share repurchases, and have a cash balance of $2.9 billion. In the second quarter, they returned $513 million to shareholders, funded $484 million in capital investments, and divested their ethylene oxide and derivatives business for $700 million while investing $500 million in a polypropylene joint venture. They have approximately $7 billion in available liquidity.

LYB has successfully extended and increased the size of their revolving credit facility, providing them with more liquidity. The Value Enhancement Program (VEP) is a key part of their long-term strategy and is expected to contribute $400 million to EBITDA in 2024. The O&P Americas segment has the largest contribution to the VEP, followed by improved product mix and increased variable margins. The VEP has also identified opportunities to lower fixed costs, resulting in an estimated $25 million benefit this year. LYB's business segments delivered $1.4 billion of EBITDA in the second quarter, with increased volumes and improved margins.

The second quarter for LYB was impacted by Hurricane Beryl, resulting in a $65 million decrease in EBITDA. Despite this, the company did not experience any workplace injuries or significant property damage. They have adjusted their operating rates to meet market demand and have provided updated financial guidance for the remainder of the year. The olefins and polyolefins America segment saw increased EBITDA due to higher production and strong demand for polyolefins in the region. LYB is well positioned in the market as the third largest polyethylene producer in North America.

The third quarter is expected to see strong demand for polyolefins, with low feedstock and energy costs benefiting North American producers. Despite potential disruptions from hurricane season, the market remains well supplied. The growth of polyolefins capacity in North America has slowed down in recent years, leading to reduced operating rates and lower margins. However, sales volumes for polyethylene and polypropylene are growing at a double-digit rate and demand in Latin America is increasingly being served by North American supply. Polypropylene volumes are also improving, but are still constrained due to a lack of demand for durable goods.

LyondellBasell's core polyolefins business is expected to benefit from tightening supply and demand balances and higher utilization rates, as North American demand returns to long-term trends. In the second quarter, the company's European ethylene production was largely sourced from cost-advantaged feedstocks, leading to increased margins. Despite logistical challenges, European cracker margins were supported by higher prices for olefins and coproducts. Planned maintenance at one of their German crackers will result in an 80% operating rate for the third quarter. The company also completed the acquisition of a 35% share of a Saudi Arabian joint venture and is evaluating opportunities for growth. In addition, a strategic review of some European assets has been announced to position the company for future success in the region.

The refining segment had a second quarter EBITDA of $15 million, with higher production offset by lower margins. The company's hedging program benefited results, but demand was slow in the driving season. The company plans to operate at 90% capacity in the third quarter and is evaluating projects for a circular and low-carbon growth strategy. The intermediates and derivatives segment had a second quarter EBITDA of $501 million, driven by increased production and strong demand for oxyfuels. Record quarterly volumes were achieved, and margins remain high. Intermediate chemicals also saw improvements due to higher margins and volumes.

The paragraph discusses the steady margins for propylene oxide and derivatives in the second quarter, with demand for durable goods remaining modest due to high interest rates and inflation. The company expects seasonal demand to benefit oxyfuels margins in the third quarter, and low costs for raw materials and steady premiums for octane are predicted to support profitability. The company also completed the sale of its ethylene oxide and derivatives businesses for $700 million, recording a book gain of $293 million. The company continues to evaluate its Maasvlakte POSM joint venture in the Netherlands as part of their European strategic review. In the advanced polymer solution segment, second quarter EBITDA was $40 million, with margins increasing and a slight decrease in volumes due to lower automotive production in Europe. The company expects modest improvement in volumes through the remainder of the year.

The second quarter results for LYB showed higher production volumes and modest improvements in market conditions. The company expects a slight improvement in the second half of the year and is well positioned with assets in the U.S. and Middle East. LYB remains disciplined in their capital allocation strategy and has a strong balance sheet. The value enhancement program is expected to contribute $400 million to EBITDA in 2024.

LYB is excited about their progress and plans to provide a more detailed update on their VEP next quarter. They are executing their long-term strategy to grow their global footprint and upgrade their core businesses. The company expects North American polyolefin demand to improve in 2024 and is proud of their high-performing team. They will now take questions from investors. One question is about the plans for their refinery, which they plan to shutter at the end of the first quarter. They have considered other options for the facility, such as becoming a plastic recycling center or a hydrogen hub, but it is unclear if these plans are contingent on DOE funding. The company has a target of 2 million tons and $1 billion in EBITDA by the end of the decade, and they expect to generate this through circular products.

Peter Vanacker discusses plans to run down the refinery by the end of Q1 2025 and mentions two projects that are progressing well. The first project involves investing in MoReTec and modifying existing hydrotreaters to upgrade plastic oil, which will be supplied to the steam crackers through pipelines. The second project involves producing renewable hydrocarbons from used cooking oil and using them as feedstock in the refinery. Both projects are part of the Circulen family and are expected to proceed well. Michael McMurray adds that many hydrogen projects may face challenges without subsidies.

The speaker clarifies the operating rates for the second quarter and third quarter for their various segments. They mention that the rates for the second quarter were largely in line with their previous guidance. They also explain that they operated their crackers at higher rates to take advantage of favorable economics, but their polymer plants operated at lower rates to match market demand. The speaker also mentions that they will be taking some downtime during the third quarter for maintenance and to balance the market demand for certain products. They encourage any further questions to be directed to their Investor Relations team.

Matthew Blair asks about the new PO/TBA plant in Channelview and its EBITDA contribution, volume improvements in PO, and the supply-demand outlook. Peter Vanacker notes that the plant ran at 90% capacity in Q2, which he considers a success. Aaron Ledet adds that demand for PO, which is used in durable applications, has not rebounded yet but they remain optimistic about the impact of rate cuts.

The company's demand for propylene oxide (PO) is currently modest, with only one third of the demand coming from PO itself and the rest from derivatives and glycols. However, there is potential for growth in this market as China plans to ban older, less efficient PO production technology. The company has also been generating positive cash flow and has used it to buy back shares, with a total capital return yield of 6% in the second quarter. There is potential for further buybacks or M&A in the future.

The speaker, possibly a CEO or executive, thanks someone named Frank for their question. They discuss the company's strong reputation for delivering free cash flow and converting EBITDA into cash. They mention recent growth in dividends and share buybacks, and state that buybacks will continue to be a part of their strategy, although they are being cautious. The speaker also mentions the company's commitment to returning 70% of free cash flow to investors. The next question from John Roberts is about the company's circular plastics program and whether the operational issues faced by another company, Eastman, are a cause for concern regarding their 2030 targets. The speaker responds by discussing their own MoReTec technology and how they have had success with it at their Ferrara plant. They state that the scope for the MoReTec 1 investment has been finalized and preparations for the investment are underway.

The speaker, Peter Vanacker, discusses the progress of their Cologne hub and their unique catalytic process. He then answers a question about their expectations for the second half of the year, mentioning that their results have been improving and that they expect ethane to remain cheap. He also mentions two potential polyethylene price increases in North America and the absorption of increased capacity through demand growth and record exports. He also notes that there is no inventory buildup and that the hurricane season has just begun.

The speaker discusses the positive momentum in the North American market and the potential for price increases for polyethylene. They also mention their ongoing review of the European asset footprint and the three possible options for those assets: upgrading profit, divesting, or rationalizing. They are currently in discussions with potential buyers and are focused on taking necessary actions in a timely manner.

During the conference call, a question was asked about the company's second half guidance and the decrease in earnings. The CEO mentioned that there is still momentum building in the market, with strong demand in the US and increases in exports and prices. However, there are concerns about China's demand being offset by new capacity coming online. The company is also waiting for inflation rates and consumer confidence to improve.

The speaker discusses the current state of the European market, noting some positive signs such as higher GDP growth and decreasing inflation rates. They also mention a slow but steady increase in demand, although there may be some temporary decreases due to scheduled turnarounds. The speaker reassures that the momentum in demand creation is still strong. A question is then asked about the volatility in the I&D segment's EBITDA, to which the speaker responds that historically it has been stable but there was a recent increase due to the oxyfuel side of things, and they expect it to continue in a steady manner.

Peter and Aaron are responding to a question about IND's earnings and the impact of the sale of the EOD business. Aaron mentions the successful operation of the PO/TBA facility and the optimization of PO assets according to technology. He also mentions the potential for upside in IND with potential interest rate decreases. Peter adds that the new PO/TBA plant puts IND in a strong position to meet increased demand for durable goods.

Chris Parkinson from Wolfe Research asks about the dynamics of polypropylene, specifically in terms of supply and demand and feedstock costs. Peter Vanacker mentions that despite durable goods demand not increasing, domestic demand in the United States for polypropylene was up 5% in Q1, the strongest quarter since Q3 2021. Kim Foley explains that the global market for polypropylene is more regional compared to polyethylene, with China seeing significant growth in recent years. The regional dynamic is influenced by feedstock costs and the reliability of propylene supply in North America.

The speaker discusses the recent increase in PDH capacity and the challenges it has brought, as well as the potential for a price increase in July. They also mention running at 60% NATPET due to attractive co-product values and the constant optimization of feedstock to produce the best value for LYB. The speaker thanks the audience for their questions and summarizes the key messages of the call.

The speaker believes that the company is making good progress on their strategy to become more focused and have a leading asset portfolio and product mix. They mention achieving a $3 billion increase in EBITDA by 2027, increasing their EBITDA margin, and having a high percentage of cost advantaged operations. They also mention upcoming updates on their long-term strategy and wish everyone a good weekend.

This summary was generated with AI and may contain some inaccuracies.