The paragraph is an introduction to a LyondellBasell teleconference led by David Kinney, Head of Investor Relations. The call is being recorded for replay and is accompanied by a slide presentation available on the company's website. It will focus on discussing business results, including forward-looking statements and non-GAAP financial measures like EBITDA and earnings per share. The paragraph emphasizes that while these forward-looking statements are based on reasonable assumptions, they involve risks and uncertainties. The call will feature several key executives, including CEO Peter Vanacker and CFO Michael McMurray, among others. The paragraph also mentions that additional documents and reconciliations for non-GAAP measures are available on the Investor Relations website.

During a call discussing third quarter results, Peter Vanacker highlighted the company's strong performance despite challenging market conditions, emphasizing their focus on safety and strategic execution. LYB achieved a total recordable incident rate of 0.13, surpassing peers in safety performance. Financially, the company faced pressure from a decline in gasoline crack spreads affecting refining and oxyfuels results, but strong ethylene margins and cracker utilization led to a 13% sequential EBITDA improvement in the Olefins and Polyolefins - Americas segment. The company's earnings were reported at $1.88 per share, with an EBITDA of $1.2 billion.

In the third paragraph of the article, LyondellBasell highlights its financial strength, emphasizing robust cash generation and high return on invested capital. The company describes its progress on long-term strategies, including the construction of the MoReTec-1 facility in Wesseling, Germany, which utilizes advanced recycling technology to convert mixed plastic waste into high-value polymers. This facility, supported by a €40 million EU Innovation Fund grant, is expected to start operations in 2026. The MoReTec technology is noted for its high efficiency, low energy use, and reduced carbon footprint. LyondellBasell anticipates strong profitability from its recycled and renewable polymers, with a goal to generate an additional $1 billion in EBITDA annually by 2030 from its Circular & Low Carbon Solutions business.

The paragraph outlines LYB's strategic plan to close its Houston refinery by the end of Q1 2025 to shift focus from a volatile business to sustainable value creation. Three projects are under consideration for the site's future: 1) Establishing a larger MoReTec unit to produce recycled feedstocks for olefins crackers; 2) Retrofitting refinery assets to produce renewable and bio-based feedstocks for circular polymers; and 3) Utilizing the site's existing infrastructure for investments and partnerships to support low-carbon initiatives. The plan leverages existing refinery resources while positioning LYB for continued growth in sustainable products.

In the paragraph, LyondellBasell's financial officer, Michael McMurray, discusses the company's recent financial performance and strategies. Over the past year, the company generated $3.4 billion in cash from operations, with an EBITDA-to-cash conversion rate of 77%. Despite facing difficult market conditions, the company anticipates improved cash generation in the fourth quarter. LyondellBasell has maintained shareholder returns with $1.8 billion in dividends and share repurchases over the last year. The company's balance sheet remains strong, with a cash balance of $2.6 billion and significant liquidity. The paragraph highlights a disciplined capital allocation approach, with $670 million generated from operations in the third quarter, $479 million returned to shareholders, and $368 million invested in capital projects. The company is focused on profitability through high-return investments, targeting $600 million in recurring annual EBITDA by year-end and $400 million in 2024. It also plans to shut down refining operations while exploring future options for the site.

In the third quarter, LYB's Olefins and Polyolefins - Americas segment achieved $758 million in EBITDA, marking a 13% increase from the previous quarter and a 50% rise year-on-year. This performance was driven by low ethane and natural gas costs, higher polyethylene prices, and increased cracker downtime in the industry which tightened ethylene supply. LYB's U.S. crackers operated at 95% capacity despite disruptions from Hurricane Beryl, enabling strong operational performance and favorable margins from merchant ethylene sales. The segment's profitability exceeded last year's results by 50%, reaching levels not seen since Q2 2022.

In the North American market, demand for polyolefins has surpassed 2023 levels, with strong sales volumes for polyethylene and polypropylene. LyondellBasell's U.S. polyethylene business has a larger domestic market share compared to peers, exporting only 26% of its volumes, which shielded it from disruptions like the port strike. While seasonal trends and rising natural gas prices may affect margins and constrain price increases in the fourth quarter, October orders are robust. North American producers benefit from a favorable oil-to-gas ratio. LyondellBasell aims to maintain 85% utilization across the segment by balancing higher cracker utilization with lower polypropylene rates due to soft demand for durable goods. In contrast, their Olefins and Polyolefins Europe, Asia, and International segment remains stable without expected macroeconomic recovery this year, generating $81 million EBITDA in the third quarter.

The paragraph discusses the company's operational updates and market conditions across its segments. In Europe, planned maintenance at the Wesseling cracker and seasonal demand softening are expected to result in operating rates of about 60% in the fourth quarter. Despite these challenges, the segment's EBITDA improved due to lower fixed and feedstock costs, leading to a better integrated polyethylene margin. The company is reviewing its European operations and has started building its MoReTec-1 facility while acquiring full ownership of APK to enhance its recycling technology portfolio. In the Refining segment, the third quarter saw an EBITDA loss of $23 million due to diminished demand and high operating rates, compressing margins. While crack spreads for gasoline and distillate fuels decreased, some margin decline was offset by a distillate hedging program. Further margin compression is expected in the near term, with operations planned at 90% capacity in the fourth quarter.

The paragraph discusses the planned shutdown of a refinery in the first quarter of 2025, outlining safety and staff impacts. The company has managed staffing since announcing the closure in 2022, aiming to retrain and redeploy affected employees, although some will leave. The shutdown will occur in stages starting January 2025, affecting earnings and cash flow but expected to provide a net cash benefit of $175 million for 2025, assuming specific oil prices. The Refining segment will be classified as discontinued operations from the first quarter of 2025.

The paragraph discusses a segment of a company's business operations, highlighting a $317 million EBITDA in the third quarter for the Intermediates and Derivatives segment, a decline due to reduced raw material margins for oxyfuels caused by declining gasoline crack spreads and higher butane prices. The Propylene Oxide & Derivatives business faced challenges from volatile propylene feedstock prices and disruptions from Hurricane Beryl and maintenance. Although there are potential demand recovery opportunities from lower interest rates, significant market improvements are not expected in 2024. Declining styrene margins impacted the Intermediate Chemicals business, despite strong performance from a new PO/TBA asset. The company is confident in its proprietary PO/TBA technology's cost advantages and sees potential in capturing growth opportunities from strong global demand for octane and gasoline.

The paragraph outlines the company's expectations and recent performance. In the fourth quarter, they anticipate lower seasonal demand and plan to operate their I&D assets at 75% capacity, with ongoing maintenance at one Bayport site. The Advanced Polymer Solutions (APS) segment faced challenges in the third quarter due to a decline in the automotive sector, resulting in reduced volumes and pricing pressures. Despite this, APS achieved a 20% year-to-date increase in EBITDA by enhancing win rates in key markets and manufacturing efficiency. Strong demand from packaging markets boosted their masterbatch business, and cost efficiencies were realized from consolidating manufacturing sites. Looking forward, APS aims to gain high-value business by improving customer satisfaction and optimizing working capital while investing in their team to achieve long-term goals.

In the third quarter, the Technology segment's EBITDA of $69 million fell short of expectations due to delayed customer licensing milestones, which are now anticipated in the fourth quarter. Catalyst volumes increased thanks to higher U.S. demand, and modest improvements in licensing revenue are expected to lead to slightly better results in the next quarter. Overall, fourth-quarter profitability is expected to decline due to seasonal demand patterns, with potential improvements pushed to 2025. In the Americas, polyolefin demand is improving, and North American costs remain favorable despite rising natural gas and ethane prices, benefiting polyethylene margins. In Europe, demand is stable but low, and market recovery is uncertain, although lower interest rates could eventually boost demand. Additionally, the European chemical industry may transform due to prolonged economic challenges, with some companies reorganizing their operations. Chinese markets are gradually improving from significantly low levels.

The paragraph discusses the impacts of recent stimulus initiatives and economic trends on various markets. In packaging, demand remains steady with a focus on affordability. U.S. infrastructure investments and favorable interest rates are boosting the building and construction sectors. The automotive market sees slowed production due to seasonal downtime and higher inventories, with muted demand expected in the near future. In the oxyfuels and refining sector, concerns over decreased demand in China and high refinery utilization are pressuring margins, which are further constrained by low seasonal demand. The company aims to optimize operations and maintain strong cash conversion. The third quarter was challenging, with lower oxyfuels and refining margins, leading to an expected dip in profitability for the second half of the year. Despite global growth slowing, North America and Middle East polyolefins production may benefit from low natural gas and ethane prices.

The paragraph discusses a company's strategic focus on disciplined capital allocation, working capital management, and upgrading its portfolio by exiting the Refining business and conducting a European strategic review. The company is investing in Germany and Texas to enhance core capabilities and aims to unlock at least $600 million in annual recurring EBITDA by the end of 2024 and $1 billion by the end of 2025. The strategy is set to grow the company, improve profitability, and create competitive advantages. The CEO expresses pride in the team's efforts to unlock value and reshape the company's future. Following the update, a Q&A session begins with a question from Vincent Andrews of Morgan Stanley regarding the North American polyethylene market, highlighting the tension between strong orders and expected seasonal price declines.

In the paragraph, Peter Vanacker explains that the strong order book in October is partly due to an overhang from slower orders in September. He anticipates the usual year-end seasonality affecting working capital management. Kim Foley adds perspective on the North American market, mentioning a feedstock advantage with ethane and fluctuations in ethylene and crude prices. The stabilization of crude prices has maintained demand for both exports and domestic markets, contributing to the strong performance in October. Following this, the conversation shifts to Patrick Cunningham from Citi, who asks about the impact of unplanned downtime versus weaker variable margins on the decline in PO and derivatives for the quarter.

The paragraph discusses the operating and pricing outlook for a chemical company in the third and fourth quarters. Despite a challenging market, sales increased by 4% globally through the third quarter, mainly in Europe and the U.S. The company faces limited exports to Asia due to higher U.S. propylene prices, affecting operating rates. The fourth quarter's operating rate is expected to be influenced by the Bayport turnaround. Future expectations for demand growth are tempered, with potential improvements not likely until after 2024. On polyethylene pricing, the company is considering two price increases in the fourth quarter, but it's uncertain if they will be effective. Domestic U.S. demand for polyethylene has grown by 6% year-to-date, with an 11% increase in exports and capacity utilization above 85%.

During a discussion, Jeffrey Zekauskas from JPMorgan inquired about the current normalized EBITDA for Lyondell's U.S. and European Olefins and Polyolefins business, initially estimated at $7 billion during their 2023 Analyst Day. Michael McMurray responded that the North American business remains largely unchanged, but Europe faces challenges due to higher energy costs and regulatory issues, likely reducing its earnings potential. Kim Foley added that macroeconomic factors, such as China's economic stimulus and EU rationalization efforts, as well as North America's advantageous feedstock costs and lack of new ethylene capacity, should also be considered.

Peter Vanacker discusses his company's ongoing transformation, including exiting refining and focusing on European assessments and investments in the Middle East. The company's future portfolio will differ from the past, emphasizing circular and renewable solutions in response to demand from OEMs and brand owners. Investments in their Cologne hub and building low-cost positions in the Middle East are underway, projecting an increase in cost advantage operations from 60% to 70%. During a Q&A, Aleksey Yefremov inquires about the APK acquisition. Vanacker expresses satisfaction with gaining full ownership of APK, highlighting its role in expanding their renewable and circular solutions. APK's technology facilitates the recycling of laminated films and is being integrated into their operations.

The paragraph discusses a company's acquisition of an advanced technology firm focused on solution-based recycling, with plans to integrate and scale up the technology by 2030. This initiative is part of their broader offering to brand owners and OEMs. A question from Josh Spector at UBS inquires about the future U.S. asset mix, specifically cracker feedstock types, and the implications of using bio-based and recycled feedstocks for refining. Peter Vanacker acknowledges this demand-driven transformation and indicates that Kim will provide further details.

The paragraph discusses the company's strategy for adapting to growing demand by enhancing their asset and investment strategies, such as developing the MoReTec-2 facility, which focuses on upgrading capacities through hydrotreaters. This adaptation involves using MoReTec technology to integrate liquid and gas fractions into their crackers, especially in Channelview, to capture incremental margins. Kim Foley adds that the company views this as a small investment for entering advanced circular product lines. The focus is on optimizing operations, particularly the cost of ethylene, and maintaining feedstock flexibility for profitability. The paragraph emphasizes maximizing opportunities through a low-cost approach in the new market.

Peter Vanacker discusses the strategic advantage of leveraging existing infrastructure to reduce investment costs compared to building new facilities, particularly in chemical recycling and emissions reduction. He highlights using existing infrastructure, like hydrotreaters in Houston, with only necessary modifications, resulting in lower investments and enabling entry into low carbon and circular product markets. Frank Mitsch inquires about updates on European restructuring, particularly whether it will increase operating rates by 10%. Peter, referencing his extensive industry experience, acknowledges this question and prepares to discuss the restructuring and outlook for European operations.

The paragraph discusses the ongoing restructuring in the European ethylene market, where significant reductions in capacity are being implemented faster than expected, with estimates suggesting between 2 and 2.5 million tons being removed. To balance the market, further reductions may be needed. The speaker describes their company's strategic response, which includes exploring opportunities such as selling or restructuring operations at various sites. They aim to achieve clarity on these efforts by 2025 and mention a shift toward more cost-advantaged operations in light of these changes. The company expects its portfolio to be 70% cost-advantaged following these adjustments.

The paragraph discusses the current state and future prospects for the polyethylene (PE) and related plastics business. The speaker, Peter Vanacker, emphasizes the importance of increasing demand for PE, which is affected by factors like consumer confidence, inflation, and interest rates. He suggests that improvements in the housing and construction sectors could boost demand. Additionally, he mentions that a significant portion of EBITDA growth this year has been driven by the Refining business. However, next year, the company plans to exit the Refining business, which will become a discontinued operation. Despite global economic challenges, such as issues in Europe and China, the other segments of the business have remained relatively stable.

In the paragraph, Kevin McCarthy from Vertical Research Partners asks about the financial impact of scaling down refining activities on other business segments, and Peter Vanacker responds that there is nothing material. McCarthy also inquires about the timeline for the MoReTec-2 investment decision. Vanacker explains that while the final investment decision is not expected until 2026, they plan to take an initial step in the first quarter of the next year, which involves preparing infrastructure and starting to order long lead items. He highlights that their investment approach is modular, as used in their project in Cologne, and they plan to apply the same strategy in Houston.

In the discussion, Hassan Ahmed questions Peter Vanacker about how his company plans to create value from its European asset review amid increasing industry announcements of asset sales and shutdowns. Vanacker explains that while many companies are shutting down assets, theirs are considered valuable, such as the flexible cracker at Bayer. He emphasizes the strategic advantages of these assets, like good logistics and favorable electricity costs due to France's nuclear industry. Vanacker believes there may be better owners for these assets, suggesting their company may not be best suited to retain them as they undergo a transformation.

The paragraph outlines the strategic initiatives of LYB (likely LyondellBasell) as they invest in Saudi Arabia and the Middle East, while also planning significant transformations by 2025. Key actions include exiting their refining business, transitioning to renewable and circular operations, assessing European assets, advancing MoReTec investments in Germany and Houston, and focusing on carbon value projects in existing large assets. LYB aims to increase their cost-advantaged operations from 60% to 70% and plans to enhance their EBITDA margin. They also highlighted an industry-leading 6% total capital return yield in Q3 and intend to provide updates on their long-term strategy.

The article concludes by wishing everyone a great weekend and encourages them to stay safe, while thanking participants and announcing the end of the conference call.

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