Q3 2023 LyondellBasell Industries NV Earnings Call

Hello, and welcome to the Lyondellbasell teleconference. At the request of Lyondellbasell. This conference is being recorded for instant replay purposes. Following today's presentation, we will conduct a question and answer session.

Now I'll turn the conference over to Mr. David Kinney head of Investor Relations, Sir you may begin.

Good day, everybody and thank you all for joining today's call before we begin the discussion I would like to point out that a slide presentation accompanies today's call and is available on our website at www Dot Lyondellbasell Dot com Slash Investor Relations.

We will be discussing our business results, while making reference to some forward looking statements and non-GAAP financial measures. We believe the forward looking statements are based upon reasonable assumptions and the alternative measures are useful to investors Nonetheless.

Nonetheless, the forward looking statements are subject to significant risks and uncertainties. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements in the presentation slides and our regulatory filings, which are also available on our Investor Relations website.

Comments made on this call will be in regard to our underlying business results using non-GAAP financial measures such as EBITDA and earnings per share excluding identified items additional.

Documents on our Investor website provide reconciliations of non-GAAP financial measures to GAAP financial measures together with other disclosures, including the earnings release and our business results discussion.

A recording of this call will be available by telephone beginning at one P. M. Eastern time today until November 27 by calling 870 76606853 in the United States and 20161 to 7415 outside the United States. The access code for both numbers.

13739196.

Joining today's call will be Peter Vanacker signed up sells Chief Executive Officer, our CFO, Michael Mcmurray, Ken Layne, our executive Vice President of Global Olefins <unk> Polyolefin Kim.

Tim Foley, our EVP of intermediates and derivatives and refining and torque Brendan our EVP of advanced polymer solutions.

During today's call, we will focus on third quarter results current market dynamics, our near term outlook and our long term strategy.

But that being said I would now like to turn the call over to Peter.

Thank you David and welcome to all of you. We appreciate you joining us today as we discuss our third quarter results.

<unk> with slide three we have three key messages for today's call first Lyondellbasell continues to generate resilient results despite challenging market conditions.

Our team delivered exceptional cash conversion during the quarter.

And our balanced approach to capital deployment was on full display as we repaid maturing bonds funded investments to grow and maintain our assets and reward the shareholders through dividends and share repurchases at.

At the same time, thanks to great teamwork, we weren't able to bolster the cash on our balance sheet.

Secondly, we remain focused on executing our long term strategy you will recall that our strategy is built on three pillars. The first pillar reflects our commitment to actively grow and upgrade the core businesses that weren't aligned with our long term strategy.

We are growing our intermediates and derivatives segment to the successful startup of our new <unk> to be a facilities. The largest single train propylene oxide plant in the world.

In the third quarter extremely strong margins for oxy fuels produced from our P. O TBA assets contributed to a record setting quarterly EBITDA.

Intermediates and derivatives segments.

We'll provide more details on this in a few minutes.

The other half of growing and upgrading our core involves difficult decisions about businesses and assets that do not really fit with our long term direction in.

In September we announced or intend to close one of our 240 propylene production units in Britain Dizzy, Italy.

And our plans to X cents to refining business and transformed a site or very well known.

These actions are examples of how dependent are so far where strategy reinforce each other well.

We're actively managing our business portfolio to reallocate resources towards assets and businesses that supports the growth of our core.

Building the second pillar of our strategy.

Both circular and low carbon solutions business.

We continue to make good progress in this area, producing and marketing over 250000 tons of recycled or renewable based polymers since 2019.

As Jim stewards, and you've underfunded plan discussed in our more recent webinar last month, we're looking forward to a final investment decision later this quarter and our first commercial advanced catalytic recycling plant in Germany.

We are not sitting still in just the past few weeks, we've announced joint ventures in two different touch plastic waste recycling companies.

Stake in a circular plastic venture capital funds and the joint venture in infrastructure 10, recycled plastic feedstocks that supports our plans for an integrated circular and low carbon solutions have in Houston.

Also our renewable electricity supply agreements in Spain.

Our value enhancement program aligns with the third pillar of our strategy stepping up our performance and culture.

I am pleased to announce that over a V. P is on track to exceed our targets for $200 million in recurring annual EBITDA run rate by the end of 2023.

As a reminder, last quarter, we increased or E. B targets by $50 million from forward, an initial target of under $50 million that we announced at our capital markets day in March.

Didn't you phone value unlocked by the VEB supports our investments to grow our core by building a profitable and game changing circular and low carbon solutions business.

My third key message is that lined up our sales focused strategy is strengthening our business portfolio to ensure our company is well positioned to capture value today and into the future.

Our track record of effective cost management operational excellence and innovation all provide competitive advantages.

Sharper focus on core businesses that benefit from leading positions in growing markets with attractive returns we can maximize the impact of these competitive advantages I hope you share our excitement for the future of Lyondellbasell.

Let's turn to slide four and begin the discussion with our foundational commitment to leadership in safety performance.

Safe operations are fundamental to our core values and provides a cornerstone for our future success.

Pinedale Brazil's here to date incident rate for employees and contractors is zero point 14, which means that our safety performance remains at best the top 75th percentile for our industry I.

I want to congratulate our team for their outstanding safety performance.

Let's turn to slide five and summarize our financial results.

During the third quarter Lyondellbasell businesses delivered resilient results and strong cash generation from our well positioned and diverse portfolio.

Earnings were $2.46 per share.

EBITDA was $1.4 billion.

At the end of the quarter, our cash from operating activities was $1 7 billion with $7 billion. So if that's available liquidity.

Now, let me turn the call over to Michael first and then to each of our business leaders, who will describe our financial and segment results in more detail.

Thank you Peter and good morning, everyone.

Please turn to slide six and let me begin by describing how we are extending our track record of efficient cash conversion that supports our investment grade balance sheet and strong shareholder returns.

During the past four quarters Lyondellbasell generated $5 billion of cash from operating activities.

At the end of the third quarter, our cash balance was $2 $8 billion, our team efficiently converted 102% of our EBITDA into cash over the last 12 months.

Let's continue with slide seven and review the details of our capital deployment during the third quarter.

Lyondellbasell remains committed to balanced and disciplined capital allocation that supports investment in our long term strategy, while providing strong returns for our shareholders.

During the third quarter, our portfolio of businesses generated $1 $7 billion in cash from operating activities.

Robust cash conversion comfortably covered capital expenditures paid down maturing bonds and enabled a return of $448 million to shareholders through dividends and share repurchases.

As Peter mentioned, our team is focused on growing and upgrading our core businesses, while actively managing our portfolio.

With the completion of our new P. O T b assets. Our capital expenditures are now focused on investments in building, a profitable circular and low carbon solutions business and smaller profit generating projects as well as maintaining safe and reliable operations across our existing asset base.

I would now like to provide a brief overview of the results from each of our segments on slide eight.

Lyondellbasell business portfolio delivered $1.4 billion of EBITDA during the third quarter, our results reflected exceptional oxy fuel margins that fueled record quarterly EBITDA and R&D.

Set by lower margins from both LNP segment's.

Results in our olefins <unk> polyolefin businesses were pressured by higher feedstock cost new industry capacity in very challenging conditions in European markets.

In our last earnings call, we shared our expectation that third quarter EBITDA would decline from second quarter results.

Subsequent events led to results that exceeded our expectations, primarily in our IMT segment during August and into September unplanned downtime at several assets across the U S. Gulf Coast Oxy fuels industry triggered a significant improvement in margins that increased R&D EBITDA by 50%.

Relative to the second quarter.

Our third quarter EBITDA for the company did decline slightly but clearly exceeded the upper end of our expectations.

We continue to align our operating rates with market demand to optimize working capital during the fourth quarter, we expect operating rates of 85% for our North American Olefins <unk> polyolefin assets.

75% for our European Olefins <unk> polyolefin.

70% for our intermediates and derivative assets with that.

I'll turn the call over to Ken Ken.

Thank you Michael.

Let's begin our segment discussions on slide nine with the performance of our olefins <unk> Polyolefin Americas segment.

Third quarter O N P Americas EBITDA was $504 million.

Integrated polyethylene margins were pressured by higher feedstock costs and continued oversupply.

Global polyethylene trade flows appear to be slowly normalizing towards pre pandemic conditions.

Increasing export prices and volumes helped to support U S polyethylene contract price increases in both August and September.

In the fourth quarter, we expect strengthening polyethylene pricing supported by stable domestic volume and continued export strength.

We also expect potential headwinds from volatile feedstock and energy costs.

The U S polyethylene market is well supplied with recent capacity additions entering the market.

We remain focused on our disciplined approach to match Lyondellbasell as operating rates with market demand.

Roughly two thirds of Lyondellbasell is North America polyethylene capacity is high density polyethylene. So we are pleased to see high density polyethylene inventories falling across the industry during September.

In support of our growth in circular in low carbon solutions, we announced a venture capital investment in Lombard Odier as plastics Circularity fund.

The fund aims to reduce pollution from plastics by investing in companies offering innovative solutions to improve the collection sorting and recycling of plastic waste.

This fund is another example of our comprehensive engagement and collaboration across the value chain to increase the availability of recycled feedstocks.

Just this week, we announced our investment in cyclic <unk>, a joint venture between <unk>, Exxonmobil and Lyondellbasell to accelerate the development of a nationwide circular economy for plastics.

Elaboration aims to capture more plastic waste from landfills and provide infrastructure and recycled materials at scale in support of our plans to build an integrated circular in low carbon solutions hub in the Houston area.

Please turn to slide 10, as we review the performance of our Olefins <unk> Polyolefin, Europe Asia and International segment.

In the third quarter weak demand continued oversupply and higher naphtha costs impacted our European margins, resulting in an EBITDA loss of $45 million.

As we approach year end, we expect European markets remained challenging with weak demand that will likely persist.

We anticipate modest polymer price increases offsetting higher feedstock and energy costs.

The slow, but gradual return of Chinese demand seems to be providing some tail winds from normalizing global trade flows.

Finally, we took several steps during the quarter to advance our long term strategy.

Part of our goal to improve our focus on core assets and businesses. We made the difficult decision to close one of our two polypropylene assets in Britain DZ, Italy.

We also announced the acquisition of 50% Stakes in two different Dutch recycling companies sniff out and deep haul sustainable resources.

Both companies are involved in the sourcing and processing of plastic packaging waste and support our efforts to build scale by expanding the production of our circulin recover products.

In line with our sustainability goals, we signed a renewable power purchase agreement for 149 megawatts of solar electricity generation capacity in Spain.

With this lyondellbasell has rapidly achieved 78% of our 2030 target for renewable electricity with over one one gigawatts of wind and solar capacity under our agreements.

I would like to recognize our teams for their quick and decisive actions to advance our strategy now.

Now I will turn the call over to Kim.

Thank you Ken.

Please turn to slide 11, as we look at the intermediates and derivatives segment.

Exceptional oxy fuel margins resulted in record third quarter segment EBITDA of $708 million.

During the quarter unplanned industry downtime for oxy fuels production on the U S. Gulf Coast led to higher blend premiums for oxy fuels relative to gasoline.

When coupled with higher crude oil prices and relatively low cost for butane raw materials oxy fuel margins expanded significantly in North America and Europe.

The outstanding performance of our Oxy fuels business during the third quarter is an example of how our diverse global business portfolio is capable of providing resilient results through market cycles with.

With our new P O T B, a asset Lyondellbasell global Oxy fuels capacity is now as large as our north American polyethylene capacity, highlighting the diversity of our growing portfolio.

And our propylene oxide and derivatives business additional volumes from the new P. O TBA asset were largely offset by the planned idling of two P. O S. M assets in the U S and Europe for approximately two months at each asset.

As actions reflect our disciplined approach to match production rates, but the demands during challenging market conditions.

Looking ahead, we expect the end of the summer driving season, and higher butane cost will cause oxy fuel margins to moderate towards the levels seen in the first half of 2023.

In line with our guidance from the beginning of the year. We are conducting planned maintenance during the fourth quarter at two of our existing propylene oxide asset.

We expect to run our global R&D assets at approximately 70% of capacity in the fourth quarter.

In September we expanded the range of our sustainable offerings with the launch of our plus L. C brand of low carbon solutions.

These products are sourced from recycled and renewable feedstocks and offer our customers a solution for meeting their greenhouse gas emissions targets.

Clean oxide styrene and other products that provide a lower carbon footprint than fossil based alternatives.

Please turn to slide 12, unless review the progress of our new P O TBA asset.

As Peter mentioned earlier, the first pillar of our strategy is to grow and upgrade our core by investing in businesses that fit our long term strategy.

Our new P O TBA asset in Houston, Texas is a key part of that correct.

This facility is the world's largest single train asset increasing lyondellbasell global propylene oxide and oxy fuels capacities.

More than 35%.

Furthermore, we believe that P. O GBA technologies are highly advantaged relative to other widely used propylene oxide technologies.

By our analysis P O TBA technologies have the lowest operating cost and the lowest carbon footprint for producing propylene oxide.

And our strategically located U S Gulf coast assets benefit from the shale advantaged butane and propylene feedstock.

During the commissioning and the startup of these assets, we achieved more than 4 million man hours of work without a recordable injury.

This relentless focus on safety and the associated attention to detail is a key part of our success.

Within two months of the plant start up we.

Completed the technical acceptance tests to prove out the full capacity of our new P O TBA facilities.

In 2023, the ramp up in our new capacity will be largely offset by planned maintenance at our existing P. O TBA assets.

But we expect to see more meaningful volume contribution from the new P. O T B a asset in 2024 and beyond.

For durable goods returns.

I'm incredibly proud of what our team has accomplished so quickly reach these milestones and look forward to their continued success.

Now, let's turn to slide 13, and discuss the results of the refining segment.

Third quarter EBITDA was $105 million.

Modest improvements in the benchmark Maya 211, crack spread were offset by a mark to market impact from a distillate hedging program.

As part of our ongoing risk management efforts, we will occasionally use derivatives to hedge commercial or financial risks during.

During the third quarter refinery cracks, particularly distillate cracks were highly favorable relative to historical levels and we took the opportunity to lock in attractive margins for a portion of our refinery output through 2024.

Distillate cracks in September outperformed our expectations, resulting in mark to market losses for our distillate hedging program.

In the near term, we expect seasonally slower demand for refined products and the Maya 211 spreads to decrease.

Currently we are executing planned maintenance on a catalytic cracker with an estimated EBITDA impact of $25 million in the fourth quarter.

We expect crude throughput at the refinery to be approximately 80% of capacity in the fourth quarter.

We remain committed to the safe operation of these assets through no later than the end of the first quarter of 2025 with a focus on high reliability as we develop new projects to transform the site in support of our circular and low carbon solutions growth strategy.

With that I will turn the call over to tore called.

Thank you Kim Let's review the third quarter results for the advanced polymer solutions segment on slide 14.

Third quarter, EBITDA was $18 million margins decreased mostly due to the sales mix for the quarter and lowered the amount. This was partially offset by incremental volumes from our metal acquisitions completed in July.

In the fourth quarter, we expect demand to be similar to the third quarter across most Aps businesses.

With service levels to our customers now restored our team is highly focused on refunding the growth pipeline for our business.

And we are making good progress in increasing the number of sustainable solutions for our customers with high performing recycled technical compounds from our newly acquired <unk> assets and product developments from across our existing asset footprint.

Our expectations for the fourth quarter of this year are modest, but we look forward to steady improvement during 2024 as the projects in our growth pipeline begin to mature and make their way to the bottom line as we work towards the goals, we discussed at our capital markets Day last March.

With that I will turn the call back to Peter.

Thank you tore please turn to slide 15, and I will discuss our results for the technology segment is going to be half of Jim's Hewitt.

Third quarter EBITDA of $146 million reflected higher licensing revenue and improved catalyst results in.

In the fourth quarter, we expect revenue associated with licensing milestones will be unusually low and catalyst volumes will decrease as a result, we estimate that full year 2023 technologies segment, EBITDA will be approximately $30 million lower than full year 2022.

As discussed in the beginning of this call. We are targeting a final investment decision for a commercial scale plant using our more to take advanced catalytic recycling technology before the end of this year and hope to share more details and over fourth quarter telephone conference.

Please turn to slide 16, and I will discuss the near term market outlook by regions and end markets.

You heard from our business leaders, we expect challenging market conditions will persist through the remainder of the year and into 2024. In addition, we expect additional pressures from typical fourth quarter seasonality associated with holidays and year end inventory management.

In the Americas pricing is expected to be supported by increased polyethylene exports and stable demand.

Integrated polyethylene margins will likely be constrained by higher feedstock costs and new market capacity.

We expect that European markets will remain highly challenged weak market demand, coupled with rising feedstock and energy costs are likely to continue to compress margins in.

And China markets are slowly improving and targeted stimulus initiatives seem to be providing some limited benefits.

Operator: Hello and welcome to the Lionel Basell Teleconference. After a class of Lionel Basell, this conference is being recorded for instant replay purposes. Following today's presentation, we will conduct a question and answer session.

And our end markets demand for our consumer packaging is slow, but steady supported by the consumer and industrial packaging markets. However, our customers continue to keep their inventory levels low.

David Kinney: I'll now turn the conference over to Mr. David Kinney, head of investor relations. Sir, you may begin. Good day, everybody. And thank you all for joining today's call.

Building and construction markets are slow, but we're watchful for potential benefits in the United States enabled by stimulus from the inflation reduction act to be partisan infrastructure law and the chips and signs Act.

David Kinney: Before we begin the discussion, I would like to point out that a slide presentation in the companies today's call and is available on our website, at www.lineelbasell.com slash investor relations. Today, we will be discussing our business results while making reference to some forward-looking statements and non-gap financial measures. We believe the forward-looking statements are based upon reasonable assumptions, and the alternative measures are useful to investors. Nonetheless, the forward-looking statements are subject to significant risk and uncertainty.

We expect demand from automotive production will continue to gain momentum.

Do you a W strike has not yet materially affected our results.

Akshay fuel margins are expected to remain well above historical averages, but declined from third quarter records to levels similar to the first half of 2023.

David Kinney: We encourage you to learn more about the factors that can lead our actual results to differ by reviewing the cautionary statements and the presentation slides. And our regulatory finalings, which are also available on our investor relations website. Comments made on this call will be in regard to our underlying business results using non-gap financial measures such as EBITDA and Ernie's per share, including identified items. Additional documents on our investor website provide recommendations of non-gap financial measures to gap financial measures together with other disclosures, including Ernie's release and our business results discussion.

Distillate inventories are expected to remain on the low end of seasonal averages and gasoline inventories have risen with the end of December driving season.

We will continue to optimize our operating rates to remain in step with market demands.

Now, let me summarize the third quarter, our outlook and our long term strategy for the company with slide 17.

Exceptional oxy fuels margins enabled record results from our intermediates and derivatives segment.

Operator: A recording of this call will be available by telephone beginning at 1 p.m. Eastern time today until November 27th by calling 877-660-6853 in the United States and 201-612-7415 outside the United States. The access code for both numbers is 137-39196.

When fee margins were pressured by higher feedstock costs and new industry capacity M. It's stable, but soft demand.

Cash generation was outstanding with one $7 billion in cash from operations, which enabled us to return approximately $450 million to shareholders in dividends and share repurchases as part of our balanced capital allocation framework.

David Kinney: Joining today's call will be Peter Bannocker, Find Up Sales Chief Executive Officer, RCFO, Michael McMurray, Ken Lane, our Executive Vice President of Global Oliphans and Polyulphans, Kim Foley, our EVP of Intermediates and Derivatives and Refining, and Torkel Brenman, our EVP of Advanced Polymer Solutions. During today's call, we will focus on third-order results, current market dynamics, our near-term outlook, and our long-term strategy.

Looking ahead to the fourth quarter, we anticipate seasonally softer demand across all of our businesses.

Main confidence and her proven ability to navigate challenging markets and deliver results.

Our team will continue to remain focused on advancing value creation through the three pillars of our long term strategy.

Peter Vanacker: With that being said, I would now like to turn the call over to Peter. Thank you, David, and welcome to all of you. We appreciate you joining us today as we discuss our third-quarter results.

Our third quarter results demonstrate the benefits from growing our core with new capacity from our P. O T b assets and we are upgrading our business portfolio by improving our focus on this score.

Peter Vanacker: Starting with slide three. We have three key messages for today's call. First, Lionel Basil continues to generate resilient results despite challenging market conditions. Our team delivered exceptional cash conversion during the quarter. And our balanced approach to capital deployments was on full display as we repaid maturing bonds, funded investments to grow, and maintain our assets, and reward the shareholders through dividends and share reperchances. At the same time, thanks to great teamwork, we were able to bolster the cash on our balance sheet.

We are reallocating resources away from non core assets and businesses at the same time, we are rapidly building a comprehensive business model to support the profitable circling on low carbon solutions business with lyondellbasell benefits from prep dissipation and down the value chain.

And we are transforming our performance and culture to embrace a comprehensive approach to value creation.

Our value enhancement program is unlocking value at an accelerating pace.

I am confident we will exceed over 2023 recurring annual EBITDA exit run rate target of $200 million.

Peter Vanacker: Secondly, we remain focused on executing our long-term strategy. You will recall that our strategy is built on three pillars. The first pillar reflects our commitment to actively grow and upgrade the core businesses that are aligned with our long-term strategy. We are growing our intermediate and derivative segments to the successful start-up of our new PUTBA facilities, the largest single-trained propellant oxide plants in the world. In the third quarter, extremely strong margins for oxyfuse produced from our PUTBA assets contributed to record-setting quarterly EBITDA for our intermediate and derivative segments.

We are laser focused on our goal to deliver a more profitable and sustainable growth engine for Lyondellbasell with that we're now pleased to take your questions.

Thank you, Sir ladies and gentlemen at this time, we will begin the question and answer session. As a reminder, if you have a question. Please press the star followed by the one on your Touchtone phone.

I would like to withdraw your question. Please press the star followed by the two we do ask you to limit to one question.

Our first question comes from the line of Jeff Zekauskas with Jpmorgan. Please proceed with your question.

Peter Vanacker: Kin will provide more details on this in a few minutes. The other half of growing and upgrading our core involves difficult decisions about businesses and assets that do not really fit with our long-term direction. In September, we announced our intent to close one of our two polypropylene production units in Brindisi, Italy, and our plans to access the refining business and transform the site are very well-known. These actions are examples of how the pillars of our strategy reinforce each other, we're actively managing our business portfolio to reallocate resources toward assets and businesses that support the growth of our core while building the second pillar of our strategy, a profitable circular and low-carbon solutions business.

Thanks very much.

But two part question.

Can you talk about.

Profitability.

Your Bora joint venture in China.

How that's changed through the course of the third quarter and into the fourth.

And I think in the quarter you bought back up.

A minimal number of shares.

Do you have a weighting between.

Dividends share repurchase that you think about our or why was the share repurchase so small.

Great. Thank you Jeff for your questions.

I mean situation pretty much on BARDA has not changed compared to the previous quarters, we continued to run at minimum capacity.

Peter Vanacker: We continue to make good progress in this area, producing and marketing over 250,000 tons of recycles or renewable-based polymers since 2019. At Jim Stewart's and Ivonne van der Land discussed in our Moritech webinar last month, we're looking forward to a final investment decision later this quarter when our first commercial advanced catalytic recycling plant in Germany. We are not sitting still and just the past few weeks we've announced to inventors in two different such plastic waste recycling companies, a stake in a circular plastic venture capital fund and a joint venture in infrastructure and recycled plastic feedstocks that support our plans for an integrated circular and low-carbon solutions have been used and also a renewable electricity supply agreement in Spain.

Ken you want to add something.

Yes, I would just say that we did have a turnaround.

Impact of the asset in the third quarter, Jeff, but what we are seeing is as signs of some domestic.

Growth in the market, there, which is which is encouraging however.

The growth rate is still not where we needed to be to absorb all of the new capacity, but.

That asset is approaching breakeven levels of EBITDA, which is great to see but it's still very challenging market in China.

Sure.

And with regard to capital allocation strategy also here nothing has changed I mean with regards to the share buybacks Michael No sure Jeff. So what I would say is that our our capital allocation priorities remain fundamentally.

Unchanged.

I think really pleased with our cash flow performance. This year in this quarter in particular, I think really good execution.

Peter Vanacker: Over a value enhancement program aligns with the third pillar of our strategy, stepping up our performance and culture. I am pleased to announce that our VEP is on track to exceed our target for $200 million in recurring annual EBITDA run rate by the end of 2023. As a reminder, last quarter we increased our VEP target by $50 million from our initial target of $150 million that we announced at our capital market say in March.

Pleased with the amount of working capital that we are able to take out of operations. This quarter as well and then again I'd say looking forward our commitments to shareholders remain intact. I think this has been demonstrated by our previous actions.

No that we communicated a 70% payout target.

For free cash flow that that stands that said, we don't put capital allocation on an autopilot.

We have a we have a point of view.

And then clearly you know clearly given all of the risks and uncertainties as we sit here today, we're being a little bit more cautious in the near term.

Peter Vanacker: The new fund value unlocked by the VEP supports our investments to grow or core while building a profitable and game-changing circular and low-carbon solutions business. My third key message is that Lionel Basil's focus strategy is strengthening our business portfolio to ensure our company is well positioned to capture value today and into the future. Our track records of effective cost management, operational excellence and innovation all provide competitive advantage. With a sharper focus on core businesses that benefit from leading positions in growing markets with attractive returns, we can maximize the impact of these competitive advantages.

Thank you. Our next question comes from the line of Patrick Cunningham with Citi. Please proceed with your question.

Hi, Good morning, you guys had a record quarter with.

Strong oxy fuels and now the TBA plans online maybe theres still some weakness in derivatives, but how should we think about margin set up into 2024 across each of the chains and what sort of ramp up in EBITDA should we see from the TBA plant as it gets to nameplate.

Yes. Thank you Patrick very good question and maybe let me first of all highlight again that of course, we have a very successful start up of our new P O TBA plants.

Peter Vanacker: I hope you share our excitement for the future of Lionel Babel.

The capacity mix in North America has of course changed I mean on one hand side, we have about $4 1 million tons of P. E capacity in North America, and then oxy fuels, we have a global overcapacity now of $4 4 million tons. So I think that's important also.

Peter Vanacker: Let's turn to slide four and begin the discussion with our foundational commitment to leadership in safety performance. Save operations are fundamental to our core values and provide the cornerstone for our future success. Byndel Babel's here-to-date incident rate for employees and contractors is 0.14, which means that our safety performance remains a buff to top 75th percentile for our industry. I want to congratulate our team for their outstanding safety performance.

To highlight that we have.

Successful investments.

While our portfolio mix.

Has successfully changed so with that Ken you want to say something around.

Your outlook for Oxy fuel margins absolutely.

Let me start by taking us that the capital markets Day, I think what we said then is mid cycle margins.

Michael McMurray: Let's turn to slide five and summarize our financial results. During the third quarter, LyondellBasell's businesses delivered resilient results and strong cash generation from our well positions and diverse portfolio. Earnings were $2.46 per share. EBITDA was $1.4 billion. At the end of the quarter, our cash from operating activities was $1.7 billion, with $7 billion of available liquidity.

The cycle would produce an indie EBITDA segment of about 1.6.

So if you think about the new plant is an incremental 450 million, we're just north of 2 billion.

Short term. This segment is challenged by a weak durable demand and capacity oversupply.

Impacts both volume and margin in our current environment, but on the positive side. We continue to see really strong demand for oxy fuels margins are above historical levels. So as we discussed in capital markets day again, it's just the burst this segment combined with our global low cost asset footprint.

Michael McMurray: Now let me turn the call over to Michael first and then to each of our business leaders who will describe our financial and segment results in more detail. Thank you Peter and good morning everyone. Please turn to slide six and let me begin by describing how we are extending our track record of efficient cash conversion that supports our investment grade balance sheet and strong share over returns. During the past four quarters, LyondellBasell generated $5 billion of cash from operating activities.

It's positive EBITDA through the cycle.

Team has done quite another very good work as well in the global supply chain management.

Building up.

More flexibility.

And global supply chain and management on Oxy fuels.

As well as on P. O. So that will also help in the future.

Thank you. Our next question comes from the line of David Begleiter with Deutsche Bank. Please proceed with your question.

Michael McMurray: At the end of the third quarter, our cash balance was $2.8 billion. Our team efficiently converted 102% of our EBITDA into cash over the last 12 months. Let's continue with slide seven and review the details of our capital deployment during the third quarter. LyondellBasell remains committed to balanced and disciplined capital allocation that supports investment and our long term strategy while providing strong returns for our shareholders. During the third quarter, our portfolio of the businesses generated $1.7 billion in cash from operating activities.

Thank you good morning.

Peter you're having very good success with the value and have some program.

The potential this program longer term can you get to a billion dollar a high run rate do you think in the 'twenty five and beyond timeframe.

Thank you David for your question I'm actually very very pleased with.

Now the Lyondellbasell team has embraced the value enhancement program I mean I extend these programs in the past at other companies and it took longer.

We have about four or 5000 people know involved we just went to phase E and having smaller sites that have now rolled out the value enhancement program also with a huge amount of success.

Michael McMurray: Robust Cash Conversion, comfortably covered capital expenditures, paid down maturing bonds and enabled a return of $448 million to shareholders through dividends and share repurchases. As Peter mentioned, our team is focused on growing and upgrading our core businesses while actively managing our portfolio. With the completion of our new POTBA assets, our capital expenditures are now focused on investments in building a profitable circular and low carbon solutions business and smaller profit generating projects as well as maintaining safe and reliable operations across our existing asset base.

As we said I mean, our original target was first year under 50 million exit run rate EBITDA, we increased it to $200 million today, we actually said, we're going to exceed that 200 million, we haven't changed over 750 million targets.

But how do we have set in the past I mean does this not a project.

It becomes part of the DNA. So it doesn't have a beginning on it and.

So we can definitely say that it's not going to stop at $750 million as a consequence, so we will be able to capture more value and we see that already happening because the sites that were involved in that first phase.

Michael McMurray: I would now like to provide a brief overview of the results from each of our segments on Slide 8. LyondellBasell's business portfolio delivered $1.4 billion of EBITDA during the third quarter. Our results reflected exceptional oxypule margins that fueled record quarterly EBITDA in I&D, offset by lower margins from both O&P segments.

They have no already started going again, I mean through new initiatives, new brainstorming sessions.

They have captured so we are ready to start building up debt.

Let's say that the first level sites.

Do you have a new.

Group of projects new projects identified to continue to increase value creation.

Michael McMurray: Results in our olefins and poly olefins businesses were pressured by higher feed-thought-cost, new industry capacity, and very challenging conditions in European markets. In our last earnings call, we shared our expectation that third quarter EBITDA would decline from second quarter results. Subsequent events led to results that exceeded our expectations, primarily in our I&D segment. During August and into September, unplanned downtime at several assets across the U.S. Gulf Coast oxypules industry triggered a significant improvement in margins that increased I&D EBITDA by 50% relative to the second quarter. Our third quarter EBITDA for the company did decline slightly but clearly exceeded the upper end of our expectations. We continue to align our operating rates with market demand to optimize working capital.

Okay.

Thank you. Our next question comes from the line of Steve Byrne with Bank of America. Please proceed with your question.

Yes. Thank you what would you put the probability that your refinery is selected as the Doe funding hydrogen hubs protections.

And if it is.

With that influence your choice of where to put some more with tech.

Process and would it also potentially lead you to to operate the hydro treaters and hydro crackers longer than that first quarter of 2025 to keep them functional for longer term utility renewable fuels.

Michael McMurray: During the fourth quarter we expect operating rates of 85% for our North American olefins and poly olefins assets, 75% for our European olefins and poly olefins, and 70% for intermediates and derivative assets.

Thanks, Steve Good question.

I mean of course, we were very pleased.

Amongst the seven projects.

Have been announced to receive funding that the.

Houston High velocity.

Ken Lane: With that, I'll turn the call over to Ken. Thank you, Michael. Let's begin the segment for discussions on slide 9 with the performance of our olefins and poly olefins America's segment. Third quarter O&P America's EBITDA was $504 million. Integrated polyethylene margins were pressured by higher feeds, not costs, and continued over supply. Global polyethylene trade flows appeared to be slowly normalizing toward pre-pandemic conditions. Increasing export prices and volumes helped to support US polyethylene contract price increases in both August and September.

Project has been included in debts.

Our project that we have.

On HR Rosa our refinery.

As part of that the height velocity.

Yeah.

So we get very good supports that's great of course, we continue to develop that project Theres still a lot of steps that need to be taken until we are at investment decisions, but.

It gives us of course quite a lot of that.

Supports are ready to move to the next step.

Having said that of course in the transformation of our Houston refinery, we have multiple projects that we're currently looking at.

Ken Lane: In the fourth quarter we expect strengthening polyethylene pricing supported by stable domestic volume and continued export strength. We also expect potential headwinds from volatile feed stock and energy costs. The US polyethylene market is well supplied with recent capacity additions entering the market. We remain focused on our discipline approach to match line double sales operating rates with market demand. Roughly two thirds of line double sales north America polyethylene capacity is high density polyethylene. So we are pleased to see high density polyethylene inventories falling across the industry during September.

One of those projects is D upgrading.

Plastic oil that would come out of or more I think to investments remember Maury I think one is the Cologne.

Good morning take two will be much larger 10 morning take one and here we are looking at the Houston hub.

So more to take two investments in Houston, leveraging upon our equipment like hydro resource that we have in Houston, two upgrades domestic oil and then having the interconnection through our pipelines with our channel view steam crackers.

Ken Lane: In support of our growth in circular and low carbon solutions, we announce the venture capital investment and Lombard ODA's plastic circularity fund. The fund aims to reduce pollution from plastics by investing in companies offering innovative solutions to improve the collection, sorting and recycling a plastic waste. This fund is another example of our comprehensive engagement and collaboration across the value chain to increase the availability of recycled feed stock. Just this week, we announced our investment in Cyklix, a joint venture between Agilix, Exxon Mogul and LyondellBasell to accelerate the development of a nationwide circular economy for plastics. The collaboration aims to capture more plastic waste from landfills and provide infrastructure and recycled materials at scale in support of our plans to build an integrated circular and low carbon solutions hub in the Houston area.

That's the second project turnkey project that we're looking at is leveraging upon those hydro <unk> to see if we can produce renewable hydrocarbons in their hydro treaters that again would leverage up on seating.

Feeding them into the steam cracker. So you have a multitude of projects currently that we have in a very early phase.

But we are having very dedicated teams.

Analyzing these projects and we will of course follow the usual Capex stage gate.

Thank you. Our next question comes from the line of Matthew Blair with Tudor Pickering Holt. Please proceed with your question.

Great. Thanks for taking my question could you talk about dynamics in polypropylene.

The landfill volumes were actually the highest in quite some time in this area what kind of trends are you seeing on global supply and demand for both this year as well as into 2024.

Ken Lane: Please start with slide 10 as we review the performance of our olefins and poly olefins Europe Asia and international segment. In the third quarter, week demand continued over supply and higher net the cost impacted our European margins, resulting in an EBITDA loss of $45 million. As we approach year end, we expect European markets to remain challenging with week demand that will likely persist. We anticipate modest polymer price increases, offsetting higher feed stock and energy costs. The slow but gradual return of Chinese demand seems to be providing some tailwinds for normalizing global trade flows.

Thank you Matthew I'm going to give that question immediately to Ken.

Yes, Thank you very much and thanks, Matthew for the question.

The dynamics that we're seeing in polypropylene around supply and demand is similar to what we're seeing in P. E. There's still a tremendous amount of new capacity that has come online over the last.

12 to 18 months, especially in China, China has now pretty much become a.

Balance than that even has been exporting some polypropylene so that market is challenged but we have seen the demand.

Come back and polypropylene and have started to see some growth quarter over quarter.

Ken Lane: Finally, we took several steps during the quarter to advance our long term strategy. As part of our goal to improve our focus on core assets and businesses, we made the difficult decision to close one of our two polypropylene assets in Brindisi, Italy. We also announced the acquisition of 50% stakes in two different Dutch recycling companies, Stiff Out and DePaul Sustainable Resources. Both companies are involved in the sourcing and processing of plastic packaging waste and support our efforts to build scale by expanding the production of our circular and recover products.

One of the one of the market segments, frankly, when I look across all of the market segments for our division.

The automotive segment. This year is showing signs of improvement, but I compare to others like our packaging.

We also have seen some improvement in catalog some some bounce back in volumes and catalog driven.

Driven by commercial construction so.

In general it's a we still have a very good portfolio of assets, but a very challenging market environment.

Ken Lane: In line with our sustainability goals, we signed a renewable power purchase agreement for 149 megawatts of solar electricity generation capacity in Spain. With this, Lionel Bazelle has rapidly achieved 78% of our 2030 target for renewable electricity with over 1.1 gigawatts of wind and solar capacity under agreements.

Thank you. Our next question comes from the line of Mike Whitehead with Barclays. Please proceed with your question.

Great. Thank you good morning, I wanted to ask a bit.

Bigger picture question on <unk> AI profitability EBITDA has been quite challenged for maybe the past five quarters or so I know you highlighted the polypropylene closure, but is there any larger scale asset asset shutdowns or restructure and being considered here is it simply a question of demand recovery or I guess.

Ken Lane: I would like to recognize our teams for their quick and decisive actions to advance our strategy.

Kim Foley: Now I will turn the call over to Kim. Thank you, Kim. Please turn to slide 11 as we look at the Intermediates and Derivatives segment. Exceptional OXIQ margins resulted in record third quarter segment EBITDA of $708 million. During the quarter unplanned industry downtime for OXIQ's production on the U.S. Gulf Coast led to higher blend premiums for OXIQ's relative to gasoline. When coupled with higher crude oil prices and relatively low cost for butane raw materials, OXIQ margins expanded significantly in North America and Europe.

How do you think about a potential pathway to get this segment back to its call. It $1 billion, So historic EBITDA level.

Thank you Mike very good question.

You read a note that.

We are.

In the midst snow off.

Negotiating with the Union Representatives on the shut down of that one particular line that we have in the southern part of Italy and Britain the XE.

Of course as usual.

We continue to look at all the other assets that we have not just limited.

Kim Foley: The outstanding performance of our OXIQ's business during the third quarter is an example of how our diverse global business portfolio is capable of providing resilient results through market cycles. With our new POTBA asset, Lionel Bazelle's global OXIQ's capacity is now as large as our North American polyethylene capacity, highlighting the diversity of our growing portfolio. In our properly in oxide and derivatives business, additional volumes from the new POTBA asset were largely offset by the planned idling of two POSM assets in the US and Europe for approximately two months at each asset.

So D O N fee business, but also the <unk> business as well as the Aps business.

Some actions you have seen that we have taken.

Like for example, I mean, all of our joint venture that we have in the mass flux on P. O S N. We.

We have idled a couple of times.

Already this year just like we did at the end of last year. So.

That continues for us.

To be very important to me.

Look at all these different opportunities.

But we have taken that decision that we are.

Our planning to shut down one line and the southern parts of Italy.

Kim Foley: These actions reflect our discipline to approach to match production rates with the demands during challenging market conditions. Looking ahead, we expect the end of summer driving season and the higher butane costs will cause oxygen margins to moderate towards levels seen in the first half of 2023. In line with our guidance from the beginning of the year, we are conducting planned maintenance during the fourth quarter at two of our existing properly in oxide assets.

Thank you. Our next question comes from the line of Frank Mitsch with Fermium Research. Please proceed with your question.

Thank you and good morning, and congrats on the nice results.

If I if I look back three months ago. The street consensus was at 141 billion for the third quarter and EBITDA in the company.

Hi.

Thought that that was probably too high and proactively went out with guidance of $1. One to 1.25 billion. You know obviously you outlined the reasons why.

Kim Foley: We expect to run our global IMD assets at approximately 70% capacity in the fourth quarter. In September, we expanded the range of our sustainable offerings with the launch of our plus LC brand of low carbon solutions.

The results came in better actually right in line with that 1141.

141 billion.

Well my question is having taken that attacked in the third quarter as we stand here today, the street's at $1 1 billion EBITDA for the fourth quarter.

Kim Foley: These products are sourced from recycled and renewable feedstocks and offer our customers a solution for meeting their greenhouse gas emissions targets with procline oxide, styrene, and other products that provide a lower carbon footprint than fossil based alternatives.

It begs the question.

In terms of no guidance that Ah I would assume that lyondell feels more positive about that results any any color you could provide would be great.

Hi, Frank Thanks for your question.

Kim Foley: Please turn to slide 12 unless review the progress of our new POTBA asset. As Peter mentioned earlier, the first pillar of our strategy is to grow an upgraded core by investing in businesses that fit our long term strategy. Our new POTBA asset in Houston, Texas is a key part of that growth. This facility is the world's largest single-trane asset, increasing line double-fells global procline oxide and oxypules capacities by more than 35%.

Absolutely I mean, youre right about that.

What we said on Q3, I mean, we didn't call it guidance, but anyhow.

The fact is of course I mean that during Q3, there were a couple of elements that happens.

In the markets like for example, some of our peers had issues with their oxy fuels capacities, they have to take them offline and due to the effects of quarters that we had or.

Holy Grail I call it of PEO facilities into wells successfully online we weren't able I mean of course to profit from that not just I mean with the volumes that we had available. But then also sky rocketing margins in that business. So our team does a lot of details behind it I mean, how our team was able to steer that.

Kim Foley: Furthermore, we believe that POTBA technologies are highly advantaged relative to other widely used procline oxide technologies. By our analysis, POTBA technologies have the lowest operating cost and the lowest carbon footprint for producing procline oxide. And our strategically located U.S. Gulf Coast assets benefit from the shale-advantaged butane and profline feedstocks. During the commissioning and the startup of these assets, we achieved more than 4 million man hours of work without a recordable injury.

Between the different regions and it shows of India.

And that business.

That we with those huge capacities that we have available and different portion of the wells that we can maximize closer to value. Remember this is a core part of growing and upgrading the core the first pillar that we have in our strategy.

We've alluded also if you'd talk about Q4.

Kim Foley: This relentless focus on safety and the associated attention to detail is a key part of our success. Within two months of the plant startup, we completed the technical acceptance tests to prove out the full capacity of our new POTBA facilities. In 2023, the ramp-up and our new capacity will be largely offset by planned maintenance at our existing POTBA assets. But we expect to see more meaningful volume contribution from the new POTBA asset in 2024 and beyond as a demand for durable goods returns.

Move it to the fact that we have a normal seasonality in Q4.

Kim also set with.

With regards to oxy fuel margins.

They are higher than what we have seen historically.

We have the capacities in place.

But of course, one cannot always lever ratio when a situation whereby.

Competition.

As they choose.

With their units.

And therefore, we've set I mean margins in OXXO fuels are going to be more.

Let's say on a bus historic level, but not on a peak level like it was in Q3.

Kim Foley: I am incredibly proud of what our team has accomplished to quickly reach these milestones and look forward to their continued success.

And then Seth.

I mean, you know what is happening in polyethylene and polypropylene in the olefins business.

Kim Foley: Now let's turn to slide 13 and discuss the results of the refining segment. Third quarter EBITDA was $105 million. Modest improvements in the benchmark Maya 211 Cracks spread were offset by a mark-to-market impact from a distillate hedging program.

So I think.

We continue to be prudent when we are looking at Q4.

Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.

Thank you.

Since you asked the Lombard Odier investment is that purely a financial investment or do you have opportunity to interact with the companies and collaborate with the companies that are that are being invested in and so to give you any edge on any potential new technologies or things like that.

Kim Foley: As part of our ongoing risk management efforts, we will occasionally use derivatives to hedge commercial or financial risks. During the third quarter refinery cracks, particularly distillate cracks, were highly favorable relative to historical levels, and we took the opportunity to lock in attractive margins for a portion of our refinery output through 2024. Distillate cracks in September outperformed our expectations, resulting in mark-to-market losses for our distillate hedging program. In the near term, we expect seasonally slower demand for refined products and the Maya 211 spreads to decrease.

Yes, Thank you very much amendments and for that question.

We've been let's say more strategic when we are looking at these kind of.

<unk> incense so of course based upon our clearly articulated strategy at the capital markets day, when we look at the second pillar of our strategy.

Building up a profitable circular and low carbon solutions business.

It's clear that in that area. We're looking at enhancing also our knowledge on what is happening in the marketplace. So that funds.

Kim Foley: Currently, we are executing planned maintenance on our catalytic cracker with an estimated EBITDA impact of $25 million in the fourth quarter. We expect crude throughput at the refinery to be approximately 80% of capacity in the fourth quarter.

That box, because we have more visibility.

On the market. In addition to that of course, we also want to make sure that we are supporting these early stage.

<unk> technologies.

Kim Foley: We remain committed to the safe operation of these assets through no later than the end of the first quarter of 2025, with a focus on high reliability as we develop new projects to transform the site and support of our circular and low carbon solutions growth strategy.

<unk> that floor in that fund so that they can continue to grow. So it is not a pure just venture financial investments. It's much more also looking at it from a strategic and conceptual point of view.

Thank you. Our next question comes from the line of Hassan Ahmed with Alembic Global. Please proceed with your question.

Michael McMurray: With that, I will turn the call over to Michael. Thank you, Kim.

Good morning, Peter.

Michael McMurray: Let's review the third quarter results for the advanced polymer solution segment on slide 14. Third quarter, EBITDA was $18 million. Margins decreased mostly due to the sales mix for the quarter and lower demand. This was partially upset by increment of volumes from our map pool acquisition completed in July. In the fourth quarter, we expect demand to be similar to the third quarter across most APS businesses. With service levels to our customers now restored, our team is highly focused on refilling the growth pipeline for our business. We are making good progress in increasing the number of sustainable solutions for our customers with high performing recycled technical compounds from our newly acquired MEPAL assets and product developments from across our existing asset footprints.

A quick one.

Currently in the news there's been a lot of talk about lower water levels in the Mississippi. So I was just wondering.

Whether that's impacting you guys in any way or form or broadly the industry as well.

Thank you for your question no no in fact, I mean for our business.

We're fine.

Okay.

Thank you. Our next question comes from the line of Alexia from Us.

With Keybanc capital markets. Please proceed with your question.

Thanks, Good morning, everyone. Your cyclic announcement comes on the heels of.

Many other act.

Acquisitions, you've made in this area and perhaps not.

One of them separately is very large but.

Michael McMurray: Our expectations for the fourth quarter of this year are modest, but we look forward to study improvement during 2024 as the projects in our growth pipeline begin to mature and make their way to the bottom line as we work towards the goals we discussed at our capital markets day last March.

Adds up to potentially quite a bit of capital could you provide any clarity on how much capital. So far went into these.

These acquisitions and what would be the sort of the run rate going forward.

Sure.

Yes, I will start on deals like this.

Hey, Alex Thank you for your questions.

Peter Vanacker: With that, I will turn the call back to Peter. Thank you, Turtle.

And.

Yes, sure I mean, the second the second pillar of our strategy.

Jim Seward: Please turn to slide 15, and I will discuss the results for the technology segments on behalf of Jim Seward. Third quarter, EBITDA of $146 million, reflected higher licensing revenue and improved capitalist results.

Just mentioned.

Is mainly focused at the beginning and building up.

These renewable and circular hubs.

One in Europe, and that is around Cologne, West Lincoln, Upsuck, where we have over assets and the other one is around Houston, So HR all channel view.

Jim Seward: In the fourth quarter, we expect that revenue associated with licensing milestones will be unusually low and catalyst volumes will decrease.

Jim Seward: As a result, we estimate that full-year 2023 technology segment, Yvida, will be approximately 30 million dollars lower than full-year 2022. As discussed in the beginning of this call, we are targeting a final investment decision for a commercial scale plant using our sporadic advanced catalytic recycling technology before the end of this year and hope to share more details in our fourth quarter telephone conference.

The way, how we have that the capital markets day articulate it's.

Our strategy.

Is that we both go upstream and working together.

With partners. So also investing in the upstream to get access to plastic waste because we do believe.

That's getting access to plastic waste his importance.

Then secondly, investing in both mechanical recycling and then also advanced recycling leveraging of course upon the relationship we had a relationship that we have that startup companies, but also.

Michael McMurray: These turn to slide 16 and I will discuss the near-term market outlook by regions and end markets.

Michael McMurray: As you heard from our business leaders, we expect that challenging market conditions will persist through the remainder of the year and into 2024. In addition, we expect additional pressures from typical fourth quarter seasonality associated with holidays and year-end inventory management. In the Americas, pricing is expected to be supported by increased polyethylene exports and stable demand. Integrated polyethylene margins will likely be constrained by higher feedstock costs and new market capacity.

One of our own advanced catalytic recycling technology to silicone <unk> technology, we have the two first investments ofit, yet that I have mentioned before.

And then thirdly also we're looking at.

Or access that we have in the marketplace through our Aps business and here we have done this maple acquisition, so that we actually or closer to the brand owners closer to the Oems.

The demand is actually coming from so we have the entire value chain, where we are taking positions and that's why you see all these smaller deals that we are making because there isn't the one company that is covering the entire value chain or ediscovery, let's say the upstream or the downstream in the value chain.

Michael McMurray: We expect that European markets will remain highly challenged, weak market demand couples with rising feedstock and energy costs are likely to continue to compress margins. In China, markets are slowly improving and targeted stimulus initiatives seem to be providing some limited benefits. In our end markets, demands for consumer packaging is slow but steady, supported by the consumer and industrial packaging markets. However, our customers continue to keep their inventory levels low.

We've said at the capital markets day around 15% of our investments may be a little bit more than that 15%, India investments over that period of time that we were talking about I mean, 2027, 2000 22030, so pretty much in that ballpark has not changed our view substantial.

Michael McMurray: Building and construction markets are slow, but we're watchful for potential benefits in the United States, enabled by stimulus from the inflation reduction act. We expect demand from automotive production will continue to gain momentum. The UAW strike has not yet materially affected our results. Oxygen fuel margins are expected to remain well above historical averages but decline from third quarter records to levels similar to the first half of 2023. Distillate inventories are expected to remain on the low end of seasonal averages and gasoline inventories have risen with the end of the summer driving season. We will continue to optimize our operating rates to remain in step with market demands.

But maybe a bit more than 15% because we see that we have very good traction Michael Yes, well. Then then just specifically put a breadbox maybe around these investments just to give people a bit more perspective, while they are important to the strategy, they're not material in amount and so kind of what we've what we've invested thus far is less than $200 million.

Yeah.

Thank you. Our next question comes from the line of Kevin Mccarthy with vertical Research partners. Please proceed with your question.

Yes, good morning.

Two questions on your I N D segment. Please.

Is I understand your comments on oxy fuels. It sounds like you expect profitability to regress based on butane.

Maybe some other factors have you seen that already in October or is that just an expectation for the future will be the first question and then secondly.

Peter Vanacker: Let me summarize the third quarter of our outlook and our long-term strategy for the company with slide 17. Exceptional Oxygen fuels margins enabled record results from our intermediates and derivative segments. OMP margins were pressured by higher feedstock costs and new industry capacity amid stable but soft demand. Cash generation was outstanding with $1.7 billion in cash from operations which enabled us to return approximately $450 million to shareholders, individuals and cherry purchases as part of our balanced capital allocation frameworks.

Uh huh.

Are your possum plants still down or or have they come back up and you know maybe you can help us with the timing of.

Those outages for Q versus <unk> in terms of sequential modeling considerations.

Thank you Kevin for your questions.

I mean, remember I mean, oxy fuel margins no what we said is.

Q3 were exceptional.

But.

We continue because we are the lowest cost producer, but we continue to be very comfortable with higher margins than what we have seen historically, so I will let him into Kim to answer.

Peter Vanacker: Mark. Looking ahead to the fourth quarter, we anticipate seasonally softer demand across our businesses and we remain confident in our proven ability to navigate challenging markets and deliver results. Our team will continue to remain focused on advancing value creation through the three pillars of our long-term strategy. Our third quarter results demonstrate the benefits from growing our core with new capacity from our POTBA assets and we are upgrading our business portfolio by improving our focus on this core.

And more details here two questions absolutely. So let's talk about the profitability of oxy fuels first.

The key drivers for their profitability there would be the price of crude.

What would be your gasoline cracks for the year.

Ratio of crude to butane as well as the premium that the market will pay to put octane into the gasoline pool.

You really saw blow out in the third quarter was that premium that people wanted to get that octane into the gasoline pool.

So to answer your question as it relates to October yes, we've seen that premium come down.

Peter Vanacker: We are reallocating resources away from non-core assets and businesses. At the same time, we are rapidly building a comprehensive business model to support a profitable circular and low-carbon solutions business where Laan DelBasell benefits from participation up and down the value chain and we are transforming our performance and culture to embrace a comprehensive approach to value creation. Our value enhancement program is unlocking value at an accelerating pace and I am confident we will exceed over 2023 recurring annual EBITDA exit run rate target of $200 million. We are laser focused on our goal to deliver a more profitable and sustainable growth engine for Laan DelBasell.

Seen some volatility in crude.

But.

That's why we're saying higher than historical but not the peaks that we saw in the third quarter.

And then to answer your question on pass some operating rate the guidance that we've given earlier in the presentation was 70% operating rates for the fourth quarter.

So we have two of our TBA plants down and we've got our Hudson plants up to meet that 70% operating rate.

And as you can see the investments on the P. O TBA plant is very successful investments.

We're running at 70% in total.

All forward capacity that gives us a huge opportunity also to continue to grow and again that fits them into the first pillar of our strategy growing and upgrading the core because these are markets that are growing.

Operator: With that, we are now pleased to take your questions. Thank you, sir.

Thank you. Our next question comes from the line of Irene Viswanathan with RBC capital markets. Please proceed with your question.

Operator: Ladies and gentlemen, at this time, we will begin the question and answer session. As your reminder, if you have a question, please press the star followed by the one on your touch tone phone. If you would like to withdraw your question, please press the star followed by the two. We do ask you to limit to one question.

Great. Thanks for taking my question.

Just wanted to I guess get some more detail on your thoughts on how youre thinking about polyethylene markets from here. So you know as you noted there they were in the two increases for August and September.

Jeff Sikovsky: Our first question comes from the light of Jeff Sikovsky's with JP Morgan. Please proceed with your questions. Thanks very much.

But we are still seeing you know some challenging conditions in China.

And then some new.

<unk> of new capacity so as.

Jeff Sikovsky: It was a two-part question. Can you talk about the possibility of your borough joint venture in China? How that has changed through the course of the third quarter and into the fourth? I think in the quarter you bought back a minimal number of shares. Do you have a waiting between dividends and sharey purchase that you think about or why was the sharey purchase so small? Great. Thank you, Jeff, for your questions.

As you look into 'twenty for do you think that we've bottomed out on <unk> markets and we should see some sustainable increases here.

How would you characterize that against the backdrop of U S demand in and you're you're operating you as well thanks.

But before I leave <unk> to answer that question I mean the.

The comfort I mean, the positive thing that we have seen is of course that.

Continuously.

E exports.

I have gone up.

During the last quarter. So that is of course a positive sign.

But one would need to of course also look at additional capacity that has come in the markets.

Jeff Sikovsky: I mean, situation pretty much on borough has not changed compared to the previous quarters. We continue to run at minimum capacity. Can you want to add something? Yeah, I would just say that we did have a turnaround that impacted the asset and the third quarter but what we are seeing is signs of some domestic growth in the market there, which is encouraging, however, the growth rate is still not where we needed to be to absorb all of the new capacity, but that asset is approaching break-even levels of EBITDA, which is great to see, but still very challenging market in China.

Or that has not really hit the markets because of some perceived I mean, what we're reading the paper picnic.

Technical difficulty typically difficulties.

Okay.

Just I'll just add to that Arun that we're seeing very good support for those exports.

Our high oil to gas ratio that we expect is going to continue, especially with the volatility around the oil markets and gas production being.

Relatively robust so we do feel good about what's happening in the North American market Europe is going to continue to be very challenged in terms of demand.

That is still that is still significantly down.

Jeff Sikovsky: And with regard to some into capital allocation strategy, also here, nothing has changed. I mean, with regards to the shared buybacks, Michael. No, sure, Jeff. So what I would say is that our our cap allocation priorities remain fundamentally unchanged. I think really pleased with our cash flow performance. This year in this quarter in particular, I think really good execution. Please with the amount of working capital that we're able to take out of operations this quarter as well.

Mainly because of the inflation impacts.

But also the margins are challenge there was the higher naphtha pricing that we saw so we've got good momentum coming out in the third quarter going into fourth quarter seeing some signs of growth in China and.

Really a very challenging market thats going to continue in Europe.

Thank you ladies and gentlemen, our final question. This morning comes from the line of Josh Spector with UBS. Please proceed with your question.

Jeff Sikovsky: And then again, I say looking forward, you know, our commitments to shareholders remain intact. I think this has been demonstrated by our previous actions. You know that we communicated at 70% target for free cash flow, that stands that said we don't put capital allocation on autopilot. You know, we have a we have a point of view. And then clearly, you know, clearly given all the risk and uncertainties as we sit here today, we're being a little bit more cautious in the near term. Thank you.

Yeah, Hi, Thanks, I actually wanted to follow up on the last point that when Youre looking at China I think.

Can you give us an update on what youre seeing in terms of inventory and are we over the hump on the capacity additions there or does that impact the shape of the curve as we go into next year.

Do you have around that thanks.

Thank you Jos.

Im going to take that to Ken because thats related that mean then to p/e.

A question.

Patrick Cunningham: Our next question comes from a line of Patrick Cunningham with city, please proceed with your question. Oh, good morning. You guys have the record corner and ID, you know, with strong occupials, and now the POTBA plans online.

So Josh we're still going to see more capacity coming online next year.

And that's why we're going to kind of be bouncing along the bottom overall as an industry I think.

First half of next year and then the hope is in the back end of next year, we start to see some some recovery in some market growth comes back to absorb the additional capacity, but there's going to be continue to be pressure around new capacity coming in.

Patrick Cunningham: Maybe they're still some weakness and derivatives, but how should we think about margin set up into 2024 across each of the chains? And what sort of ramp up in EBITDA should be seen in the POTBA plan as it gets to name plate. Yeah, thank you, Patrick. Very good question.

And that's that's going to be the biggest watch out for us.

Peter Vanacker: And maybe let me first of all highlight again, that of course, with the very successful startup of our new POTBA plan, the capacity mix in North America has of course changed. Now, I mean, on one hand side, we have about 4.1 million tons of PE capacity in North America, and an office use, we have a global capacity now of 4.4 million tons. So I think that's important also to highlight with that successful investments or portfolio mix has, I mean, successfully changed.

Yes, you see I mean that.

From Beijing.

<unk> continuously.

<unk> and incentives that are being put in place.

We don't see the construction market picking up yet, but if you then look for example in China.

Motive has been 10% year on year increase in Evs is actually has been closer to 40%.

But on the other hand side I mean, we see that consumers continue to save I mean, a lot of money. So savings continue to be at a high level.

But.

More and more of these incentives, one which expect and of course also that the confidence will grow in the population in the middle class and that of course would tapped and its influence on it.

Kim Foley: So with that, Kim, you want to say something around your outlook, I mean, for up to fuel margins. Absolutely. Let me start by taking this back to capital markets that I think what we said then is mid cycle margins for the cycle would produce an ID even a segment of about 1.6. So if you think about the new plant as an incremental 450 million, we're just north of 2 billion short term, this segment is challenged by weak, durable demand and capacity over supply, which impacts both volume and margin in our current environment.

They are spending on.

Durable goods as well.

Okay.

Thank you, ladies and gentlemen, I'm showing no other questions at this time I will turn the floor back to Mr. <unk> for any final comments.

Thank you again very good questions and let me highlight again that we are very pleased with our results considering the market environment that we are.

In Q3.

Kim Foley: But on the positive side, we continue to see really strong demand for oxyfules margins are above historical levels. So as we discussed in capital markets day, again, it's this diversity of this segment combined with our global low cost asset footprint. It provides positive evita through the cycle. The team has done quite a lot of very good work as well in the global supply chain management by building up more flexibility in global supply chain management on oxyfules as well as on PO. So that will also help in the future. Thank you.

Great job has been done by all the teams.

We of course continue to look forward to sharing updates over the coming months as we continue to also make progress on the implementation of our long term strategy.

We hope you all have a great weekend and a safe one therefore, we wish you a great weekend stay well and stay safe. Thank you.

Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.

David Begleiter: Our next question comes from the line of David Begleiter with Deutsche Bank. Please proceed with your question. Thank you. Good morning. Peter, you're having very good success with a value enhancement program.

David Begleiter: What's the potentialest program, longer term, can get to a billion dollar or high? Run right do you think in the 25 and beyond timeframe?

Peter Vanacker: Thank you, David, for your question. I'm actually very, very pleased with how the line of Basell team has embraced a value enhancement program. I mean, I've stunned these programs in the past at other companies and it took longer. We have about four or five thousand people now involved. We just went to Phase E in having smaller sites that have now rolled out the value enhancement program also with a huge amount of success.

Peter Vanacker: As we said, I mean, original target was first year, 150 million exit run rate EBITDA. We increased it to 200 million. Today, we actually said we're going to exceed that 200 million. We haven't changed over 750 million targets, but as we have said in the past, I mean, this is not a project. It becomes part of the DNA, so it doesn't have a beginning and an end. So we can definitely say that it's not going to stop at 7 and the 50 million has a consequence, so we will be able to capture more value.

Peter Vanacker: And we see that already happening because the size that we're involved in the first phase, they have now already started going again. I mean, through new initiatives, new brainstorming sessions that they have captured. So we already start building up that circle, let's say, that the first-level sites already have a new group of projects, new projects identified, I mean, to continue to increase value creation.

Operator: Thank you.

Steve Bern: Our next question comes from line of Steve Bern with Bank of America. Please thank you. What would you put the probability at that your refinery is selected as the DOE funded Hydrogen Hub for Texas? And if it is, would that influence your choice of where to put the more tech process? And would it also potentially lead you to operate the hybrid treaters and crackers longer than that first quarter of 2025 to keep them functional for longer-term utility and renewable fuels?

Steve Bern: Thanks, Steve. Good question. I mean, of course, we were very pleased that amongst the seven projects that have been announced to receive funding that the Houston High Velocity project has been included in that. Our project that we have on HROS, our refinery is part of that high velocity. So we get very good support, that's great. Of course, we continue to develop that project. There's still a lot of steps, I mean, that need to be taken until we are at investment decisions, but it gives, of course, quite a lot of support already to move them into the next step.

Peter Vanacker: Having said that, of course, in the transformation of our use and refinery, we have multiple projects that we are currently looking at. One of those projects is the upgrading of plastic oil that would come out of our Moritech 2 investment. Remember, Moritech 1 is the cologne hub. Moritech 2 will be much larger than Moritech 1. And here we have the we are looking at the Houston hub. So Moritech 2 investment in Houston, leveraging upon our equipment like hydro-threaters that we have in Houston to upgrade that plastic oil and then having the interconnection through our pipelines with our channel view team characters.

Peter Vanacker: That's the second project. Third project that we are looking at is leveraging upon those hydro-threaters to see if we can produce renewable hydro-carbons in their hydro-threaters that again would leverage upon feeding them into the steam cracker. So you have a multitude of projects currently that we have in a very early phase, but we are having very dedicated teams analyzing these projects. And we will then, of course, follow the usual Capix stagecades. Thank you.

Matthew Blair: Our next question comes from the line of Matthew Blair with Tudor Pickering Holt. Please proceed with your question. Great. Thanks for taking my question. Could you talk about dynamics in polypropylene? I think the line of volumes were actually the highest in quite some time in this area. What kind of trends are you seeing on global supply and demand for both this year as well as in the 2024? Thanks. Thank you, Matthew.

Ken Lane: I'm going to give that question immediately to Ken. Yes. Thank you very much. And thanks, Matthew, for the question. You know, the dynamics that we're seeing in polypropylene around supply and demand is similar to what we're seeing in PE. There's still a tremendous amount of new capacity that has come online over the last 12 to 18 months, especially in China. China has now pretty much become balanced and even has been exporting some polypropylene.

Ken Lane: So that market has challenged, but we have seen the demand come back in polypropylene and have started to see some growth quarter of a quarter. One of the market segments, frankly, when I look across all of the market segments for our division, the automotive segment this year is showing signs of improvement when I compare to others like packaging. We also have seen some improvement in Cadilloy, some bounce back in volumes in Cadilloy driven by commercial construction. So, you know, in general, we still have a very good portfolio of assets, but a very challenging market environment.

Operator: Thank you.

Mike Leithead: Our next question comes from the line of Mike Lighthead with Barclays. Please present with your question. Great. Thank you. Good morning. I wanted to ask a bigger picture question on O&P EAI profitability. The EBITDA has been quite challenged for maybe the past five quarters or so. I know you highlighted the polypropylene closure, but is there any larger scale asset shutdowns or restructuring being considered here? And is it simply a question of demand recovering or I guess, how do you think about a potential pathway to get this segment back to what's called $1 billion or so historic EBITDA level? Thank you, Mike.

Peter Vanacker: Very good question. And as you have noticed, we are in the midst now of negotiating with the union representatives on the shutdown of that one particular line that we have in the southern part of Italy and Brindisi. Of course, as usual, we continue to look at all the other assets that we have, not just to be limited to the ONP business, but also the IND business as well as the APS business.

Peter Vanacker: I mean, some actions you have seen that we have taken, like for example, I mean, our joint venture that we have in the mass flood on POSM, we have handled that a couple of times already this year, just like we did at the end of last year. So that continues for us to be very important that we look at all these different opportunities. But we have taken, I mean, that decision that we are planning to shut down, I mean, that one line in the southern part of Italy. Thank you.

Frank Mitsch: Our next question comes from the line of Frank Mitch with Fermi Research. Please proceed with your question. Thank you and good morning and congrats on the nice results. If I look back three months ago, the street consensus was at 1.41 billion for the third quarter in EBITDA. And the company thought that that was probably too high and proactively went out with the guidance of 1.1 to 1.25 billion. Obviously, you outlined the reasons why the result came in better actually right in line with that 1.1 billion.

Frank Mitsch: Well, my question is, having taken that tact in the third quarter, as we stand here today, the streets at 1.1 billion EBITDA for the fourth quarter, it begs the question in terms of no guidance that I would assume that Lionel feels more positive about that results. Any color you could provide would be great. By Frank, thanks for your question. And absolutely, I mean, you're right. I mean, about what we said on Q3.

Frank Mitsch: I mean, we didn't call it guidance, but anyhow, the, the fact is, of course, I mean that you're in Q3, there were a couple of elements that happens in the market, like, for example, some of our peers had issues with their oxyfuels capacities, they had to take them offline. And due to the fact, of course, that we had our really gray like call it of PO facilities in the world, successfully online, we were able, I mean, of course, to profit from that, not just, I mean, the volumes that we had available, but then also skyrocketing margins in that business.

Frank Mitsch: So our team, there's a lot of details behind it. I mean, how our team was able to fear that between the different regions, and it showed them in the, I mean, that we have in that business, that we, with those huge capacities that we have available in different parts in the world that we can maximize also the value. Remember, this is a core part of growing and upgrading the core, the first pillar that we have in our strategy.

Frank Mitsch: Now, we've alluded also, if you talk about Q4, we've alluded to the fact that we have a normal seasonality in Q4. Kim also said, with regards, I mean, to up to a few margins, they are higher, I mean, than what we have seen historically. We have the good capacities, I mean, in place, but of course, one cannot always leverage a for the situation whereby competition has issues, I mean, with their units, and therefore, we've said, I mean, margins and oxygen fuels are going to be more, let's say, on an above historic level, but not on a peak level, like it was in Q3. And then, I said, I mean, you know, what is happening, I mean, in polyethylene and polypropylene, and the all offense business.

Peter Vanacker: So, I think we continue to be prudent when we are looking at Q4. Thank you.

Vincent Andrews: Our next question comes from Lyne, Vincent Andrews, with Morgan Stanley. Please proceed with your question. Thank you. Yes, the Lombard ODA investment.

Peter Vanacker: Is that surely a financial investment or do you have opportunity to interact with the companies and collaborate with the companies that are being invested and to give you any edge on any potential new technologies or things like that? Yeah, thank you very much. I mean, Vincent, for that question. We've been, let's say, more strategic when we are looking at these kind of investments in funds. So, of course, based upon, or clearly articulated strategy at the capital market say, when we look at the second pillar of our strategy, building up a profitable circular and low-carbon solutions business, it's clear that in that area, we're looking at enhancing also our knowledge on what is happening in the marketplace.

Peter Vanacker: So, that fund takes that box because we have more visibility. On the market, in addition to that, of course, we also want to make sure that we are supporting these early stage technologies, companies that were in that fund so that they can continue to grow. So, it is not a pure just venture financial investment. It's much more also looking at it from a strategic and conceptual point of view. Thank you.

Hassan Ahmed: Our next question comes from the line of a son Amid with Olympic Global. Please proceed with your question.

Hassan Ahmed: Morning, Tita. You know, a quick one, recently in the news, there's been a lot of talk about lower water levels in the Mississippi. So, it's just wondering, you know, whether that's impacting you guys in any way or form or broadly the industry as well. Thank you, Hatan, for your question. No, no one back to me for our business. No, we're fine. No. Thank you.

Aleksey Yefremov: Our next question comes from the line of Alexa Yaframov with Keybank Capital Markets. Please proceed with your question. Thanks.

Aleksey Yefremov: Good morning, everyone. Your cyclix announcement comes in the heels of, you know, many other acquisitions you've made in this area and perhaps, you know, not one of them separately is very large, but I mean, it adds up to potentially quite a bit of capital. Could you provide any clarity on how much capital so far went into these acquisitions and what would be the sort of the run rate going forward? for Avostand on deals like this.

Aleksey Yefremov: Aleksey, thank you for your questions. And yeah, sure. I mean, the second pillar of our strategy, as I just mentioned, is mainly focused at the beginning on building up these renewable and circular apps, one in Europe, and that is around Cologne, Westling Knapsack, where we have our assets, and the other one is around Houston, so HRL channel view. The way how we have at the capital market, they articulated our strategy, is that we both go upstream in working together with partners, so also investing in the upstream to get access, I mean, to plastic waste, because we do believe that getting access, I mean, to plastic waste is important.

Aleksey Yefremov: Then secondly, investing in both mechanical recycling, and then also advanced recycling, leveraging, of course, upon the relationship that we have with startup companies, but also upon our own advanced catalytic recycling technology, the so-called Moritech technology, with the two first investments, OFID, yet, that I have mentioned before. And then thirdly, also, we're looking at our access that we have in the marketplace, through our APS business, and here we have done this maple acquisition, so that we actually are closer to the brand owners, closer to the OEMs, where the demand is actually coming from.

Aleksey Yefremov: So we have the entire value chain, where we are taking positions, and that's why you see all these smaller deals that we are making, because there isn't enough one company that is covering the entire value chain, or that is covering, let's say, the upstream or the downstream in the value chain. We've set up a capital market, say, around 15% of our investments, maybe a little bit more than that 15%, in the investments over that period of time that we were talking about, I mean, 2027, 2020, 2030.

Aleksey Yefremov: So pretty much, I mean, in that four-barc has not changed over a few substantially, but that's maybe a bit more than the 15% because we see that we have very good traction. Michael? Yeah, and then to specifically put a bread box, maybe around these investments, just to give people a bit more perspective while they're important to the strategy. They're not material and amount, and so what we've invested thus far is less than 200 million. Thank you.

Kevin Mccarthy: Our next question comes from the line of Kevin McCarthy with Vertical Research Partners. Please push it with your question. Yes, good morning.

Kevin Mccarthy: Maybe two questions on your IND segment, please. First, as I understand your comments on oxy fuels, it sounds like you expect profitability to regress based on butane and maybe some other factors. Have you seen that already in October or is that just an expectation for the future? We'll be the first question, and then secondly, are your possum plants still down or have they come back up and maybe can help us with the timing of.., of those outages, 4Q versus 3Q in terms of sequential modeling considerations.

Kevin Mccarthy: Thank you, Kevin, for your questions. I mean, remember, I mean, Oxyfuel margins, what we said is few three were exceptional, but we continue because we are the lowest cost producer. We continue to be very comfortable, I mean with higher margins and what we have seen historically. So I will lead to me to Kim to answer in more details your two questions. Absolutely. So let's talk about the profitability of Oxyfuel spurs. So some of the key drivers for their profitability there would be the price of crude, would be your gasoline cracks, would be your ratio of crude to butane as well as the premium that the market will pay to put octane into the gasoline pool.

Kevin Mccarthy: So you really saw blow out in the third quarter was that premium that people wanted to get that octane into their gasoline pool. So to answer your question as it relates to October. Yes, we've seen that premium come down, which we've seen some volatility and crude, right, but that's why we're saying they're higher than historical, but not the peaks that we saw in the third quarter. And then to answer your question on possum operating rates, the guidance that we've given earlier in the presentation was 70% operating rates for the fourth quarter.

Kevin Mccarthy: So we have two of our POTBA plants down and we've got our possum plants up to meet that 70% operating rate. And as you can see, I mean with the investments on that POTBA plant is a very successful investment as we are running at 70% in total of our capacity that gives us a huge opportunity also to continue to grow and again that fits them into the first pillar of our strategy growing and upgrading the core because these are markets that are growing.

Peter Vanacker: Thank you.

Arun Viswanathan: Our next question comes from the line of a room this one off on with RBC capital markets, please proceed with your question. Great. Thanks for taking my question. I just wanted to I guess get some more detail on your thoughts on how you're thinking about polyethylene markets from here. So, you know, as you noted, there, there were the two increases for August and September, but we're still seeing, you know, some challenging conditions in China and then some new absorption of new capacity.

Arun Viswanathan: So as you look into 24, do you think that we've bottomed out on PE markets and we should see some sustainable increases here? How do you characterize that with against the backdrop of U.S, demand and your operating review as well? Thanks.

Ken Lane: But before I leave, I mean to can to answer that question. I mean the comfortable. I mean the positive thing that we have seen is of course that continuously. The exports have gone up during the last quarter. So that is of course a positive sign. But one would need to of course also look at additional capacity that has come in the markets or that has not really hit the markets because of some perceived.

Ken Lane: I mean what we're reading the paper technical difficulties. I'll just add to that, Arun, that we're seeing very good support for those exports with a high oil and the gas ratio that we expect is going to continue, especially with the volatility around oil markets and gas production being relatively robust. So we do feel good about what's happening in the North American market. Europe is going to continue to be very challenged in terms of demand.

Ken Lane: And that is still significantly down, mainly because of the inflation impacts, but also the margins are challenged there with the higher NAFTA pricing that we saw. We've got good momentum coming out of the third quarter, going into fourth quarter, seeing some signs of growth in China and really a very challenging market that's going to continue in Europe.

Ken Lane: Thank you.

Joshua Spector: Ladies and gentlemen, our final question this morning comes from the line of Josh Specter with UBS. Please proceed with your question. Yeah, hi, thanks. Everyone to follow up on the last point that when you're looking at China, I think can you give us an update of what you're seeing in terms of inventory? And are we over the hump on the capacity additions there? What does that impact the shape of the curve as we go into next year? What's your view around that? Thanks. Thank you, Josh.

Ken Lane: And I'm going to take that to Ken because that's related to, I mean, then to P.E, your question. Yeah, so we're still going to see more capacity coming online next year. And that's why we're going to kind of be bouncing along the bottom, you know, overall as an industry, I think, first half of next year. And then, you know, the hope is in the back end of next year, we start to see some recovery and some market growth comes back to absorb the additional capacity, but there's going to be continue to be pressure around new capacity coming in.

Ken Lane: And that's going to be the biggest watch out for us. Yeah, you see, I mean that from Beijing, there's continuously evaluations and incentives that are being put in place. We don't see the construction market now picking up yet, but if you then look, for example, in China, the motive has been 10% year on year increase and EVs has actually has been closer into 40%. But on the other hand side, I mean, we see that consumers continue to save, I mean, a lot of money savings continue to be at a high level.

Ken Lane: But more and more of these incentives, one which expect, and of course also that the confidence will grow in the population in the middle class. And that of course, would have been its influence on their spending on durable goods as well.

Operator: Thank you. Ladies and gentlemen, I'm showing no other questions at this time.

Peter Vanacker: I'll turn the floor back to Mr. Vannecker for any final comments. Thank you again. Very good questions. And let me highlight again that we are very pleased to meet with the results, considering the market environment that we are. In Q3.

Operator: Great job that has been done by all the teams. We are first continue to look forward to sharing updates over the coming months as we continue to also make progress on the implementation of our long-term strategy. We hope you all have a great weekend and a safe one. Therefore, we wish you a great weekend, stay well and stay safe. Thank you.

Operator: This concludes today's conference call. You may disconnect your line at this time. Thank you.