Release Date: November 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- LyondellBasell Industries NV (LYB, Financial) demonstrated strong safety performance with a total recordable incident rate of 0.13, exceeding top quartile peers.
- The company achieved a 13% sequential EBITDA improvement in its Olefins and Polyolefins - Americas segment, marking the strongest quarter since Q2 2022.
- LYB generated $670 million in cash from operating activities, maintaining strong cash conversion despite challenging market conditions.
- The company started construction of its MoReTec-1 facility in Germany, supported by a EUR40 million EU Innovation Fund grant, showcasing its commitment to circular and low-carbon solutions.
- LYB maintained robust shareholder returns with dividends and share repurchases totaling almost $1.8 billion over the last 12 months.
Negative Points
- A sharp decline in gasoline crack spreads negatively impacted the refining and oxyfuels segments, leading to lower quarterly results.
- The European Olefins and Polyolefins segment faced stable but muted demand with no signs of macroeconomic recovery, resulting in an EBITDA of $81 million.
- The Advanced Polymer Solutions segment experienced weaker demand, particularly in the automotive sector, leading to substantial headwinds for volumes and pricing.
- The Intermediates and Derivatives segment saw a $184 million decline in EBITDA due to decreased raw material margins for oxyfuels.
- LYB anticipates typical seasonal demand patterns will result in lower fourth-quarter profitability across most businesses, with improvements deferred until 2025.
Q & A Highlights
Q: What is causing the strong order book for North American polyethylene in October despite expectations of a seasonal slowdown?
A: Peter Vanacker, CEO, explained that the strong orders in October are partly due to an overhang from September, which was slower compared to previous months. Kimberly Foley, EVP of Global O&P, added that the stabilization of crude prices and continued demand for both exports and domestic markets are contributing to the strong order book.
Q: How did unplanned downtime and weaker margins affect the Intermediates and Derivatives segment in the third quarter?
A: Aaron Ledet, EVP of Intermediates and Derivatives, noted that despite the challenging environment, sales were up 4% year-over-year. Higher propylene prices in the US limited exports to Asia, impacting operating rates. The Bayport turnaround, which started at the end of October, also affected the segment.
Q: Do you expect polyethylene prices to decline in the fourth quarter?
A: Peter Vanacker stated that while there are price increase initiatives for October and November, it is too early to predict the outcome. He remains hopeful for some price increases due to strong demand and capacity utilization, but discussions are ongoing.
Q: What is the current view on the normalized EBITDA for the US and European Olefins and Polyolefins business?
A: Michael McMurray, CFO, mentioned that the North American business's earnings power remains largely unchanged. However, the European business may have lower earnings power due to higher energy costs and regulatory challenges. Kimberly Foley added that macroeconomic factors and regional advantages must be considered.
Q: What is the maturity level of the APK technology, and is it ready for capacity expansions?
A: Peter Vanacker highlighted that APK's solvent-based recycling technology is advanced and will be integrated into LyondellBasell's portfolio. The company plans to scale up the technology, similar to their MoReTec investments, to be part of their offering by 2030.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
