Q3 2024 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.

Operator: Hello, and welcome to the LyondellBasell teleconference. At the request of LyondellBasell, this conference is being recorded for instant replay. Following today's presentation, we will conduct a question and answer I would now like to turn the conference over to Mr. David Kinney, Head of Investment Relations.

Speaker Change: Following today's presentation, we will conduct a question and answer session I would now like to turn the conference over to Mr. David Kinney head of Investor Relations, Sir you may begin.

David Kinney: Sir, you may begin. Thank you, operator, and welcome, everyone, to today's call.

David Kinney: Thank you operator, and welcome everyone to today's call before we begin the discussion I would like to point out that a slide presentation to accompany this call and is available on our website at www Dot Lyondellbasell Dot com Slash Investor Relations.

David Kinney: Before we begin the discussion, I would like to point out that a slide presentation accompanies the call and is available on our website at www.LyondellBasell.com slash investor Today 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, the forward-looking statements are subject to significant risk and uncertainty.

David Kinney: Today, we will be discussing our business results, while making references to some forward looking statements and non-GAAP financial measures. We believe the forward looking statements are based upon reasonable assumptions on the alternative measures are useful to investors. 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.

David Kinney: We encourage you to learn more about the factors that can 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.

David Kinney: To differ by reviewing the cautionary statements in the presentation slides and our regulatory filings, which are also available on our Investor Relations website.

David Kinney: 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.

David Kinney: 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 on our business results discussion.

David Kinney: Joining today's call will be Peter Vanacker, LyondellBasell's Chief Executive Officer, our CFL, Michael McMurray, Kim Foley, our Executive Vice President of Global Olefins and Polyolefins and Refining, Aaron Ledet, our EVP of Intermediates and Derivatives, and Torkel Rhenman, our EVP of Advanced Polymer Solutions. During today's call, we will focus on third quarter results, as well as updates on our long term strategy. We will also discuss current market dynamics and our near term outlook.

David Kinney: Joining today's call will be Peter Mann occur lined up sells chief Executive officer, our CFO, Michael Mcmurray, Kim Foley, our executive Vice President of global Olefins, <unk>, Polyolefin and refining Erin La de our EVP of intermediates and derivatives and Tortola, Brendan our EVP of advanced polymer solutions.

David Kinney: During today's call, we will focus on third quarter results as well as updates on our long term strategy. We will also discuss current market dynamics and our near term outlook.

Peter Vanacker: With that being said, I would now like to turn the call over to Peter. Thank you Dave, and welcome to all of you. We appreciate you joining us today as we discuss our third quarter results. And yet again, our people did an excellent job navigating challenging market conditions while remaining laser focused on the execution of our strategy. Our long-course footprints in the Americas and the Middle East continue to perform well to capture profitable growth in olefins, polyolefins, propylene oxide, and oxyfuel.

Speaker Change: That being said I would now like to turn the call over to Peter.

Peter Mann: Thank you, Dave and welcome to all of you. We appreciate you joining us today, as we discuss or third quarter results and yet again, our people did an excellent job navigating challenging market conditions, while remaining laser focused on the execution of our strategy.

Peter Mann: Our low cost footprint in the Americas, and the Middle East continues to perform well to capture profitable growth in olefins, polyolefin, <unk> propylene oxide and oxy fuels.

Peter Mann: Let's begin with slide three and discuss our continued leadership in safety performance.

Peter Vanacker: Let's begin with slide three and discuss our continued leadership in safety performance. LYB's success in operational performance starts with a core focus on safety. Our goal zero commitment is to operate safely with zero injuries, zero incidents and zero accidents. Our focus is demonstrated by LYB's September year-to-date total recordable incident rate of 0.13. We are very proud of the continued commitment to safety from our people. Our company is exceeding the safety performance of the top quartile peers in our sector.

Peter Mann: Oh I be success and operational performance starts with a core focus on safety.

Peter Mann: It goes to zero commitment is to operate safely with zero injuries and zero incidents and zero accidents.

Peter Mann: Our focus is demonstrated by NOI be September year to date total recordable incident rate of zero point 13, we are very proud of.

Peter Mann: The continuous commitment to safety from our people.

Peter Mann: Our company is exceeding the safety performance of the top quartile peers in our sector.

Peter Mann: Please turn to slide four as we briefly review the financials for the quarter.

Peter Vanacker: Please turn to slide four as we briefly review the financials for the quarter. Our third quarter results demonstrate our ability to generate value despite very challenging market conditions. A sharp decline in gasoline crack spreads drove sequentially lower quarterly results for refining enoxy fuels, but we were able to run our newest POTBA asset at nameplate capacity. Strong ethylene margins and outstanding cracker utilization allowed our olefins and polyolefins America segments to post a 13% sequential EBITDA improvement. the strongest quarter for the segment since the second quarter of 2022. As a result, earnings were $1.88 per share with EBITDA of $1.2 billion.

Peter Mann: Or third quarter results demonstrates our ability to generate value despite very challenging market conditions.

Peter Mann: A sharp decline in gasoline crack spreads drove sequentially lower quarterly results for refining and oxy fuels, but we were able to run our newest speed or TBA assets at nameplate capacity.

Peter Mann: Strong, Italy in margins and outstanding Cracker utilization allowed or olefins, <unk> polyolefin Americas segments to post a 13% sequential EBITDA improvements the strongest quarter for this segment since the second quarter of 2022.

Peter Mann: As a result earnings were $1.88 per share with EBITDA of $1 $2 billion.

Peter Vanacker: LYB generated $670 million in cash from operating activities. maintaining strong cash conversion on a weaker profit base. Our return on invested capital remains above our cost of capital and our cash conversion remains robust.

Peter Mann: <unk> generated $670 million in cash from operating activities.

Peter Mann: Maintaining strong cash conversion on a weaker profit base.

Peter Mann: Our return on invested capital remains a bus or a cost of capital.

Peter Mann: And our cash conversion remains robust.

Peter Vanacker: We continue to advance our long-term strategy with good progress during the quarter. On slide five, we highlight one of these milestones. In September, we started construction of our MORETEC-1 facility in Wesseling, Germany, our first commercial-scale plant utilizing LyondellBasell's proprietary catalytic advanced recycling technology. The investment is a clear indication of our commitment to European brand owners and OEMs. German Chancellor Olaf Scholz and other top officials attended the event to demonstrate solid governmental support. The innovative nature of our proprietary technology has been underlined by the fact that the EU Innovation Fund awarded Moritec one of 40 million euro grants.

Peter Mann: We continue to advance our long term strategy with good progress during the quarter.

Peter Mann: On slide five we highlight one of these milestone in.

Peter Mann: In September we started the construction of our more it take one facility and Wessling, Germany. Our first commercial scale plant utilizing lyondellbasell is appropriate to recap the lytic advanced recycling technology.

Peter Mann: The investment is a clear indication of our commitment to European Brent owners and Oems.

Peter Mann: German Chancellor all our shows and other top officials attended the event demonstrates solid governmental support.

Peter Mann: The innovative nature of our appropriate Terry technology has been underlined by the fact that the EU innovation fund awarded Murdick, one a 40 million Euro grants.

Peter Mann: More to take one is expected to start up in 'twenty 'twenty six we have capacity to produce 50000 metric tons per year of cracker feedstocks recycled from hard to recycle mixed plastic waste.

Peter Vanacker: Monotech 1 is expected to start up in 2026 with capacity to produce 50,000 metric tons per year of cracker feedstocks recycled from hard to recycle mixed plastic waste. The recycled feedstocks will be used in our existing olefins crackers and produce high-value circular polymers that are indistinguishable from fossil-based polymers. Our proprietary Morantec technology is unique, with a plastic-to-plastic yield of more than 80%, low energy intensity, the ability to utilize 100% renewable electricity, and half of the carbon footprint compared to fossil-based feedstocks. As a leader in the market today, we continue to see healthy margins for our recycled and renewable based polymers, given the strong demands and limited supply for these materials.

Peter Mann: The recycled feedstocks will be used in our existing olefins crackers and produce high value circular polymers that are indistinguishable from fourth side of based polymers.

Peter Mann: Although appropriate Terry Moore, and take technology is unique with a plastic to plastic yield of more than 80%.

Peter Mann: Low energy intensity.

The ability to utilize 100% renewable electricity and half over the carbon footprint compared to fossil based feedstocks.

Peter Mann: As a leader in the market today, we continue to see healthy margins for our recycled or renewable base polymers, given the strong demand and limited supply for these materials.

Peter Vanacker: This profitability is core to the second pillar of our corporate strategy to create a profitable circular and low carbon solutions or CLCS business. We continue to expect annual CLCS incremental EBITDA of $1 billion by 2030.

This profitability is core to the second pillar of our corporate strategy to create a.

Peter Mann: It's a booth circular and low carbon solutions or C. L. C S business.

Peter Mann: We continue to expect annual C. L C S incremental EBITDA of $1 billion by 2030.

Peter Mann: Okay.

Peter Vanacker: As we build our first integrated hub in Germany, we are also planning our second integrated hub for Houston.

Peter Mann: As we built over our first integrated tuck in Germany. We are also planning our second integrated.

Peter Mann: For Houston.

Peter Vanacker: Please turn to slide six as we discuss the future of our Houston refinery. We continue on our path to close the refinery by the end of the first quarter of 2025. Another strategic milestone for LYB. We're exiting a volatile, low margin business to focus our resources on opportunities for sustainable value creation. Kim will discuss the financial implications of the refinery closure later in the call.

Please turn to slide six as we discussed the future of our Houston refinery site.

Peter Mann: We continue on our path to close the refinery by the end of the first quarter of 2025.

Peter Mann: Another strategic milestone for <unk>.

Peter Mann: We're exiting of volatile low margin business to focus our resources on opportunities for sustainable value creation.

Speaker Change: Kevin will discuss the financial implications of the refinery closure later in the call.

Peter Vanacker: On this slide, we outline three projects under consideration for the future of the refineries. The first project, subject to a final investment decision, is to utilize a portion of the site for a second, larger Moray Tech unit. We expect that MORETEC2 will be twice the size of our German plants with the capacity to produce 100,000 tons of cracker feed. We plan to leverage upon our existing hydrotreaters at the refinery and retrofit. This will allow us to upgrade both the recycled feedstocks coming from our MORETEC2 unit and feedstocks from third-party suppliers for use in our olefins crackers for the production of circular and low-carbon circulin revive polymers.

Speaker Change: On this slide we outlined three projects under consideration for the future of the refinery site.

Speaker Change: The first project subject to a final investment decision is to utilize a portion of this site for our second larger more ray take units.

Speaker Change: We expect that more to take it too will be twice the size of our German plant with a capacity to produce 100000 tons of cracker feedstocks.

Speaker Change: Okay.

Speaker Change: We plan to leverage up on our existing hydro treaters at the refinery and retrofit them.

Speaker Change: This will allow us to upgrade both the recycled feedstocks coming from all of them already take two units and feedstocks from third party suppliers for use in our olefins crackers for the production of circular and low carbon circled on revive polymers.

The second project under consideration is to read through fit some of the other refining assets to produce renewable and bio based feedstocks.

Peter Vanacker: The second project under consideration is to retrofit some of the other refining assets to produce renewable and biobased feedstock. These feedstocks would also be used in our existing olefins crackers for the production of circular and low carbon circular renew polymers. And with a substantial array of utilities, laboratories, pipelines, storage, logistical assets, and other infrastructure on the 700 acre site. The refinery provides ample opportunity for investments and partnerships to support LYB's continued growth in low carbon feedstocks and products. Although crude refining at the site will end, we have several opportunities to repurpose the site to capture sustainable value.

Speaker Change: These feedstocks would also be used in our existing olefins crackers for the production of circular and low carbon circular renewable polymers.

Speaker Change: I live in substantial array of utilities laboratories pipelines storage and logistical assets.

Speaker Change: Other infrastructure on the 700 acre site.

Speaker Change: The refinery provides ample opportunity for investments in partnerships to support <unk> continued growth and low carbon feedstocks and products.

Speaker Change: Although crude to refining at the site will and we have several opportunities to repurpose decided to capture sustainable value.

Peter Vanacker: We are leveraging our existing cost advantage assets to satisfy growing market demand for circular and low carbon solutions.

Speaker Change: We are leveraging our existing cost advantage assets to satisfy growing market demand for circular and low carbon solutions.

Speaker Change: I will know turn the call over to Michael to discuss our financial progress.

Michael McMurray: I will now turn the call over to Michael to discuss our financial program. Thank you, Peter. And good morning, everyone. Please turn to slide 7 and let me start by discussing our cash generation. Over the past year, LyondellBasell generated $3.4 billion of cash from operating activities. Our team converted EBITDA into cash at a 77% rate over the last 12 months. broadly in line with our long-term target of 80%. Difficult market conditions have persisted, pressuring our third quarter cash generation. However, we see potential tailwinds from lower global interest rates and economic stimulus measures in China. In the fourth quarter, we expect cash generation to improve.

Michael McMurray: Thank you Peter and good morning, everyone.

Michael: Please turn to slide seven and let me start by discussing our cash generation.

Michael McMurray: Over the past year, Lyondellbasell generated $3 $4 billion of cash from operating activities.

Michael: Our team converted EBITDA into cash at a 77% rate over the last 12 months.

Michael: Broadly in line with our long term target of 80%.

Michael: Difficult market conditions have persisted pressuring our third quarter cash generation. However, we still we see potential tailwind from lower global interest rates and economic stimulus measures in China in the fourth quarter, we expect cash generation to improve.

Michael: In the third quarter, we were able to maintain strong shareholder returns with dividends and share repurchases totaling almost $1.8 billion over the last 12 months.

Michael McMurray: In the third quarter, we were able to maintain strong shareholder returns with dividends and share repurchases totaling almost $1.8 billion over the last 12 months. At the end of the third quarter, our cash balance was $2.6 billion. Despite being at a challenging point in the cycle, our balance sheet remains robust with less than two turns of net debt to EBITDA and available liquidity of $7.3 billion.

Michael: At the end of the third quarter, our cash balance was $2 $6 billion.

Michael: Despite being at a challenging point in the cycle, our balance sheet remains robust with less than two turns of net debt to EBITDA and availability liquid and available liquidity of $7 $3 billion.

Michael McMurray: Let's continue with slide 8 and review the details of our third quarter capital allocation. As Peter mentioned, we generated $670 million of cash from operating activities. During the quarter, we returned $479 million through dividends and share repurchases, while funding $368 million of capital investment. Our team remains focused and committed to balanced and disciplined capital allocation, especially during difficult market conditions. We are expanding profitability with high return investments in our value enhancement program. We expect to unlock $600 million in recurring annual EBITDA by the end of this year and contribute $400 million of EBITDA during 2024.

Michael: Let's continue with slide eight and review the details of our third quarter capital allocation.

Speaker Change: As Peter mentioned, we generated $670 million of cash from operating activities. During the quarter, we returned $479 million through dividends and share repurchases, while funding $368 million of capital investment.

Speaker Change: Our team remains focused and committed to balanced and disciplined capital allocation, especially during difficult market conditions, we are expanding profitability with high return investments in our value enhancement program, we expect to unlock $600 million in recurring annual EBITDA by the end of this year and contribute.

Speaker Change: $400 billion of EBITDA during 2024.

Michael McMurray: We are on track to shut down refining operations with valuable options for the future of the site. And to grow and upgrade our core, our European asset review is well underway, and we are gauging market interest for the five olefins and polyolefins assets that we discussed last quarter.

Speaker Change: We are on track to shutdown refining operations with valuable options for the future of the site.

Speaker Change: And to grow and upgrade our core our European asset review is well underway and we are gauging market interest for the five olefins and polyolefin assets that we discussed last quarter.

Michael McMurray: Let's turn to slide 9, and I'll provide a brief overview of our segment results. LYB's business portfolio delivered $1.2 billion of EBITDA during the third quarter. Lower crude prices and gasoline crack spreads led to lower profitability for both the refining segment and the oxyfuels business within the IND segment. The decline in these two businesses exceeded the sequential net decline in profitability at the consolidated group level. Improved ethylene margins and our strong cracker operations from our O&P America segment provided upside.

Speaker Change: Let's turn to slide nine and I'll provide a brief overview of our segment results L Y bees business portfolio delivered $1 $2 billion of EBITDA during the third quarter.

Speaker Change: Lower crude prices and gasoline crack spreads led to lower profitability for both the refining segment and the oxy fuels business within the <unk> segment. The decline in these two businesses exceeded the sequential net decline in profitability at the consolidated group level.

Speaker Change: Improved ethylene margins and our strong cracker operations from our O N P. Americas segment provided upside and with that I'll turn the call over to Kim Kim.

Kim Foley: With that, I'll turn the call over to Kim. Kim? Thank you, Michael. Let's begin the segment discussions on slide 10 with the performance of the olefins and polyolefins America segment. During the third quarter, O&P America's EBITDA was $758 million, up 13% quarter on quarter and 50% year on year. Integrated polyethylene margins were supported by low ethane and natural gas costs, coupled with higher polyethylene prices following the successful July price increase. During the quarter, the industry experienced increased cracker downtime, which led to lower ethylene costs and tighter ethylene supplies supporting olefins margins. LYB's U.S. crackers ran at 95% rates during the quarter, which includes the impacts of Hurricane Beryl in July.

Kim: Thank you Michael let's begin the segment discussion on slide 10, with the performance at the olefin and Polyolefin Americas segment.

Kim: During the third quarter I O N P. Americas, EBITDA was $758 million up 13% quarter on quarter and 50% year on year.

Kim: Integrated polyethylene margins were supported by low ethane and natural gas costs, coupled with higher polyethylene prices. Following the successful July price increase.

Kim: During the quarter the industry experienced increased cracker downtime, which led to lower ethane costs and tighter ethylene supply supporting olefins margins.

Kim: L. I D O U S crackers ran at 95% rates during the quarter, which includes the impacts of hurricane barrel in July.

Kim Foley: Our strong operational performance allowed us to capture the opportunity for favorable margins with our merchant ethylene sales and benefited integrated polyethylene margins. We estimate that the additional profitability from our merchant ethylene sales alone offset approximately $50 million of estimated EBITDA impact from Hurricane Beryl. The segment's third quarter profitability exceeded last year's results by 50% and reached levels not seen since the second quarter of 2022. North American industry demand for polyolefins continues to exceed 2023, with September year-to-date polyethylene and polypropylene sales volumes up 7% and 4% respectively. Industry exports of polyethylene are up 11% September year to date, with 46% of North American industry sale volumes sold in export markets.

Kim: Our strong operational performance allowed us to capture the opportunity for favorable margins with our merchant ethylene sales and benefited integrated polyethylene margins.

Kim: We estimate that the additional profitability from our merchant ethylene sales alone offset approximately $15 million of estimated EBITDA impact from hurricane barrel.

Kim: The segment's third quarter profitability exceeded last year's results by 50% and reached levels not seen since the second quarter of 2022.

Kim: North American industry demand for polyolefin continues to exceed 20 twenty-three with September year to date polyethylene and polypropylene sales volumes up seven and 4% respectively in.

Kim: Industry exports of polyethylene are up 11% September year to date with 46% of North American industry sell all items sold export markets.

Kim Foley: LyondellBasell's U.S. polyethylene business holds a stronger domestic market share than our local peers, with only 26% of LYB's September year-to-date polyethylene volumes exported. As such, we did not experience any material disruptions during the brief port strike.

Kim: Lyondellbasell U S polyethylene business holds a stronger domestic market share than our local peers with only 26% of L. I B September year to date polyethylene volumes export it.

Kim: As such we did not experience any material disruptions during the brief port strike.

Kim: In the fourth quarter, we anticipate the typical seasonal trends of softer demand and customers desire to minimize here in inventories could constrain price increase initiatives.

Kim Foley: In the fourth quarter, we anticipate the typical seasonal trends of softer demand and customers' desire to minimize year-end inventories could constrain price increase initiatives. In addition, sequentially, higher natural gas and ethane prices are likely to pressure integrated margins. Nonetheless, as of this week, our October North American polyethylene orders are the strongest we've seen so far in 2024. Despite volatile oil prices, the favorable oil-to-gas ratio continues to provide an advantage for North American producers relative to oil-based production in other parts of the world. LYB remains well positioned as a leading producer in North America with strong customer relationships built over decades.

Kim: In addition sequentially higher natural gas and ethane prices are likely to pressure integrated margins.

Kim: Nonetheless as of this week, our October North American polyethylene orders are the strongest we've seen so far in 'twenty 'twenty four.

Kim: Spike volatile oil prices.

Kim: Favorable oil to gas ratio continues to provide an advantage for north American producers relative to oil based production in other parts of the world.

Kim: L. I b remains well positioned as a leading producer in North America with strong customer relationships built over decades.

Kim: During the fourth quarter, we will remain focused on aligning our operating rates to certain domestic and export market demands targeting 85% utilization across the segment with higher cracker utilization offset by lower polypropylene rates given the ongoing soft demand for durable goods market.

Kim Foley: During the fourth quarter, we will remain focused on aligning our operating rates to serve domestic and export market demands, targeting 85% utilization across the segment with higher cracker utilization offset by lower polypropylene rates, giving the ongoing soft demand for durable goods markets.

Kim: It's.

Speaker Change: Please turn to slide 11, as you review the results of our olefin and Polyolefin Europe Asia and International segment.

Kim Foley: Please turn to slide 11 as we review the results of our olefins and polyolefins Europe, Asia, and international segment. In the third quarter, demand in the market served by our O&P EAI segment remains stable with no indications of macroeconomic recovery likely for the remainder of this year. The segment-generated EBITDA of $81 million, volumes declined as we began a planned turnaround at our largest cracker in Europe. Segment EBITDA improved sequentially as lower fixed and feedstock costs led to a higher integrated polyethylene margin. In the European market, we are seeing increased talk of strategic evaluations and capacity rationalizations across our peers.

Speaker Change: In the third quarter demand in the markets served by our M. P. A R segment remains stable with no indications of macroeconomic recovery and likely for the remainder of this year.

Speaker Change: Segment generated EBITDA of $81 million.

Speaker Change: Ins declined so again, a planned turnaround at our largest cracker in Europe.

Speaker Change: Segment, EBITDA improved sequentially as lower fixed and feedstock costs led to a higher integrated polyethylene margins.

Speaker Change: And the European market, we are seeing increased talk of strategic evaluations and capacity rationalizations across our peers.

Kim Foley: As in the U.S., we expect seasonal softening of demand for olefins and polyolefins. The drive for minimizing urine inventories will also pressure European markets. In China, we are encouraged by the recent stimulus initiatives, but we have yet to see where the initiatives are resulting in improved market demand. Operationally planned maintenance at our large Bessling cracker in Germany will continue into the fourth quarter. As a result of this planned maintenance and softer seasonal demand, we are targeting operating rates of approximately 60% during the fourth quarter. We continue to make progress on our strategic objectives and O&P EAI segment.

Speaker Change: As in the U S. We expect seasonal softening of demand for olefin and polyolefin is the drive for minimizing yearend inventories will also pressure in European markets.

Speaker Change: In China, we are encouraged by the recent stimulus initiatives, we have yet to see where the initiatives are resulting in improved market demand.

Speaker Change: Operationally planned maintenance at our large ethylene cracker in Germany will continue into the fourth quarter.

Speaker Change: As a result of this planned maintenance and softer seasonal demand we are targeting operating rates of approximately 60% during the fourth quarter.

We continue to make progress on our strategic objectives and O N P. A L. S segment, our European review is underway. In addition to starting the construction of a more tech one in September. We also acquired full ownership of a PK in October, allowing us to integrate apk's unique solvent based.

Kim Foley: Our European review is underway. In addition to starting the construction of our Morotech 1 in September, we also acquired full ownership of APK in October, allowing us to integrate APK's unique solvent based low density polyethylene recycle technology as part of our comprehensive portfolio for building a profitable CLCS business.

Speaker Change: Low density polyethylene recycle technology as part of our comprehensive portfolio for building a profitable C. L. C S business.

Speaker Change: Now, let's turn to slide 12 and review the results of the refining segment.

Kim Foley: Now let's turn to slide 12 and review the results of the refining segment. In the third quarter, lackluster demand and high industry operating rates compressed margins and resulted in an EBITDA loss of $23 million. Crack spreads for both gasoline and distillate fuels declined during the quarter. Our distillate hedging program offsets some of the margin decline. In the near term, we expect further margin compression as the Maya 2-in-1 crack spreads continue to fall. We intend to operate at approximately 90% of capacity in the fourth quarter. We remain focused on safe and reliable operations as we move forward shutting down the refinery during the first quarter of the year.

Speaker Change: In the third quarter lackluster demand and high industry operating rates compressed margins and resulted in an EBITDA loss of $23 million.

Speaker Change: Crack spreads for both gasoline and distillate fuels decline during the quarter.

Speaker Change: Our distillate hedging program offset some of the margin declines.

Speaker Change: In the near term, we expect further margin compression as the Maya 211 crack spreads continue to fall.

Speaker Change: We intend to operate at approximately 90% of capacity in the fourth quarter.

Speaker Change: We remain focused on safe and reliable operations as we move forward shutting down their refinery during the first quarter of the year.

Speaker Change: As Peter outlined earlier, our team is making good progress in evaluating strategic projects to transform the refinery site in support of our growth strategy.

Kim Foley: As Peter outlined earlier, our team is making good progress and evaluating strategic projects to transform the refinery site in support of our growth strategy. We have also kept the impacts of our people top of mind throughout this transformation. Since 2022, when we announced our intention to shut down the refinery, we have carefully managed staffing levels. As our staffing requirements decrease following the shutdown, we intend to retrain and redeploy as many affected employees as possible for the next stage of their careers with LYB. Nonetheless, some employees will end up leaving our company and we will comply with all applicable laws and support our people as best possible.

Speaker Change: We have also kept the impacts of our people top of mind throughout this transformation.

Speaker Change: Since 2022 when we announced our intention to shut down the refinery we have carefully managed staffing levels.

Speaker Change: Our staffing requirements decreased following the shutdown, we intend to retrain and redeploy as many affected employees as possible for the next stage of their careers with L y B.

Speaker Change: Nonetheless, some employees will end up leaving our company and we will comply with all applicable laws and support our people as best possible.

Speaker Change: Now, let's turn to slide 13, and outline more details on the operational and financial impacts from the refining exit.

Kim Foley: Now let's turn to slide 13 and outline more details on the operational and financial impacts from the refining exit. Following the holiday season, we plan to begin shutting down the first crude and coca train during January of 2025. Then in February, we expect to begin the shutdown of the second crude and coca train, the FCC, and other ancillary units. This staged approach is designed to ensure a safe, orderly, and responsible shutdown of these complex operations. The refinery shutdown impacts both earnings and cash flow. We have been accruing costs related to the shutdown on our income statement since we announced our intentions in April of 2022.

Speaker Change: In the holiday season, we plan to begin shutting down the first crude and coker trains during January of 2025.

Speaker Change: In February we expect to begin to shut down at the second crude and Coker trains the FCC and other ancillary units.

Speaker Change: The staged approach is designed to ensure a safe orderly and responsible shut down of these complex operations.

Speaker Change: The refinery shutdown impacts both earnings and cash flow, we had been accruing costs related to the shutdown on our income statement since we announced our attention is in April 2022.

Kim Foley: However, once the shutdown begins in 2025, we will begin to realize the cash impacts depicted on this slide. During 2025, we expect to release working capital that more than offsets the cash costs of shutting down the refinery. We expect a net cash benefit of approximately $175 million during 2025, assuming a Brent crude price of $80 per barrel. We expect the refining segment will be reported as discontinued operations from the first quarter of 2025. Within discontinued operations, the ongoing costs related to the former refining segment are expected to be less than $50 million a year. These are the estimated costs for keeping the site safe while maintaining operational capability for selected assets and infrastructure.

Speaker Change: However, once the shutdown begins in 2025, we will begin to realize the cash impacts depicted on this slide.

Speaker Change: During 2025, we expect to release working capital that more than offsets the cash cost of shutting down their refinery.

We expect net cash benefit of approximately 175 million during 2025, assuming a brent crude price of $80 per barrel.

Speaker Change: We expect the refining segment.

Speaker Change: It will be reported as discontinued operations from the first quarter of 2025.

Within discontinued operations the ongoing costs related to the former refining segment are expected to be less than $50 million. A year. These are the estimated cost for keeping the site safe, while maintaining operational capability for selected assets and infrastructure.

Aaron Ledet: With that, I will turn the call over to Aaron. Thank you, Kim. Please turn to slide 14 as we look at the intermediates and derivatives segment. In the third quarter, segment EBITDA was $317 million, a decline of $184 million driven by a material decrease in raw material margins for oxyfuel. Oxyfuel's margins fell on the declining gasoline crack spreads and slightly higher prices for butane raw materials. Our propylene oxide and derivatives business encountered headwinds due to volatile prices for propylene feedstocks and volume impacts from Hurricane Beryl and planned maintenance.

Speaker Change: With that I will turn the call over to Aaron.

Aaron: Thank you Kim please turn to slide 14, as we look at the intermediates and derivatives segment.

Aaron: Third quarter segment, EBITDA was $317 million, a decline of $184 million driven by a material decrease in raw material margins for oxy fuels.

Aaron: Oxy fuels margins fell on the declining gasoline crack spreads and slightly higher prices for butane raw materials are.

Aaron: Our propylene oxide and derivatives business encountered headwinds due to volatile prices for propylene feedstocks and volume impacts from hurricanes barrel and planned maintenance. While we are encouraged by the potential for lower interest rates to drive recovery appeal, indeed demand from durable goods, we do not expect markets to materially improve during the.

Aaron Ledet: While we are encouraged by the potential for lower interest rates to drive recovery and peel indeed demand from durable goods, we do not expect markets to materially improve during the remainder of 2024. Our Intermediate Chemicals business was impacted by declining styrene margins due to ample market supply. During the quarter, our newest POTVA asset ran very well. And although volatile fuel markets negatively impacted this quarter's OxyFuels results, we believe the fundamentals for this business remain supportive. Our proprietary POTVA technology produces oxyfuels from butane at a sizable discount to crude oil used in gasoline production. Global demand for octane and gasoline remains strong and our oxy fuels provide some of the highest octane levels for all of gasoline blends.

Aaron: Remainder of 2024.

Aaron: Intermediate chemicals business was impacted by declining styrene margins due to ample market supply.

Aaron: During the quarter, our newest P O T. A S. It ran very well.

Aaron: Although volatile fuel markets negatively impacted this quarter's oxy fuels results.

Aaron: We believe in the fundamentals for this business remain supportive.

Aaron: Our proprietary P O TBA technology produces oxy fuels from butane at a sizable discount to crude oil used in gasoline production.

Aaron: Global demand for octane in gasoline remained strong and our oxy fuels provides some of the highest octane levels for all of gasoline blend stocks.

Aaron Ledet: We expect our POTVA assets will continue to provide a world leading cost advantage for propylene oxide and oxygen. LYB is well positioned to capture opportunities from demand growth and high cost supply rationalization.

Aaron: We expect our P. P O T. B a assets will continue to provide a world leading cost advantage for propylene oxide and oxy fuels.

Aaron: How widely is well positioned to capture opportunities from demand growth and high cost supply rationalization.

Aaron Ledet: As we move through the fourth quarter, we expect lower seasonal demand across most of our IND businesses, with oxyfuels margins remaining low, consistent with seasonal norms. In line with our guidance, planned maintenance at one of our Bayport POTVA assets will continue into the fourth quarter. We will continue to match our production with market demand and expect to operate our IND assets at rates of approximately 75% during the fourth quarter.

Aaron: As we move through the fourth quarter, and we expect lower seasonal demand across most of our IMT businesses with oxy fuels margins remaining low consistent with seasonal norms.

Aaron: In line with our guidance planned maintenance at one of our Bay Porte P. O TBA assets will continue into the fourth quarter. We will continue to match our production with market demand and expect to operate our I N D assets at rates of approximately 75% during the fourth quarter.

Torkel Rhenman: With that, I will turn the call over to Torkel. Thank you, Aaron. Please turn to slide 15 as we review the third quarter results for the Advanced Polymer Solutions segment. Third quarter EBITDA was $19 million. The APS segment faced weaker demand, particularly in the automotive sector, where third quarter global production dropped by 5% from the prior year. The automotive downturn created substantial headwinds for both volumes and pricing. Despite these market headwinds, APS continues to grow through improved win rates in critical markets and improved manufacturing efficiency. So the third quarter, year to date, APS Ibita is up by more than 20% over 2023.

Speaker Change: With that I will turn the call over to total.

Speaker Change: Thank you Aaron Please turn to slide 15, as we review the third quarter results with the advanced polymer solutions segment.

Speaker Change: Third quarter, EBITDA was $19 million, the Aps segment faced weaker demand, particularly in the automotive sector, where third quarter global production dropped by 5% from the prior year.

Speaker Change: The automotive downturn created substantial headwinds for both volumes and pricing. Despite these market headwinds Aps continues to grow through improved win rates in critical markets and improved manufacturing efficiency.

Speaker Change: So the third quarter year to date, a P. S. EBITA is up by more than 20% over 2023.

Torkel Rhenman: Resilient demand from packaging markets allowed us to grow year to date volumes and margins in our master batch business relative to the first nine months of last And we are now realizing the cost benefits from our effort to rationalize 18 APS manufacturing sites around the world over the past six years. Looking ahead, we continue to focus on earning additional high-value business by further improvements in our net promoter scores and win rates with customers to restore our growth pipeline. In addition, the APS team continues to optimize working capital to improve cash flow from the business. We're investing in our core team with a growth and value mindset to deliver on our long term goals for the APS business.

Speaker Change: With student demand from packaging markets allowed us to grow year to date volumes and margins in our message about your business relative to the first nine months of last year.

Speaker Change: And we are now realizing the cost benefits from our efforts to rationalize 18, Aps manufacturing sites around the world over the past six years looks.

Speaker Change: Looking ahead, we continue to focus on earning additional high value business by further improvements in our net promoter scores and win rates with customers to restore our growth pipeline. In addition, the Aps team continues to optimize working capital to improve cash flow from the business.

Speaker Change: We're investing in our core team with a growth and value mindset to deliver on our long term goals for the Aps business.

Torkel Rhenman: With that, I will return the call back to Peter. Thank you, Torkel. Please turn to slide 16, and I will discuss the results for the technology segment on behalf of Jim Seward. Third quarter EBITDA of $69 million was lower than the guidance we provided during the second quarter telephone conference. The lower results were due to several customers not achieving the licensing milestones that were expected to occur during the third quarter, but these milestones are on track for the fourth quarter. Catalyst volumes improved on the stronger US demand. In the fourth quarter, we expect modest improvements in licensing revenue will drive slightly higher sequential results.

Speaker Change: With that I will return the call back to Peter.

Peter Mann: Thank you to Oracle, Please turn to slide 16, and I will discuss the results for the technology segment wouldn't be half of Jim Stewart.

Peter Mann: Third quarter EBITDA of $69 million was lower than the guidance, we provided during the second quarter telephone conference.

Peter Mann: The lower results were due to several customers not achieving the licensing milestones that were expected to a cure during the third quarter, but these milestones or on track for the fourth quarter.

Peter Mann: Catalyst volumes improved on the stronger USD minutes.

Peter Mann: In the fourth quarter, we expect modest improvements in licensing revenue will drive slightly higher sequential results.

Peter Mann: Now, let me share our views on our key regional product markets on slide 17 in line with earlier comments, we expect that typical seasonal demand patterns will result in lower fourth quarter profitability across most of our businesses with the potential for improvement.

Unknown Executive: Now let me share our views on our key regional and product markets on slide 17.

Unknown Executive: In line with our earlier comments, we expect that typical seasonal demand patterns will result in lower fourth quarter profitability across most of our businesses, with the potential for improvement deferred until 2025. In the Americas, polyolefin demand is improving relative to 2023. While U.S. natural gas and ethane prices have increased since August, North American costs remain quite favorable on a global scale and should continue to benefit integrated polyethylene margins. Within Europe, market demand remains muted, but stable. We see limited downside from typical reductions in seasonal demand. Indications of near-term market recovery remain elusive, but we are watchful for the potential for demand improvements resulting from lower interest rates.

Peter Mann: Deferred until 2025.

Peter Mann: In the Americas Polyolefin demand is improving relative to 2023.

Peter Mann: While U S natural gas and ethane prices have increased since August north American costs remain quite favorable on a global scale and should continue to benefit integrated polyethylene margins.

But in Europe market demand remains muted but stable.

Peter Mann: We see limited downside from typical reductions in seasonal demand indications.

Peter Mann: Indications of near term market recovery remain elusive, but we are watchful for the potential for demand improvements, resulting from lower interest rates.

Unknown Executive: Pressures from prolonged trough conditions and the need to reinvest in aging assets are likely to reshape the European chemical industry. Several peers are following LyondellBasell's lead and announcing programs to transform their European footprint through asset sales, capacity rationalization, and other actions. These initiatives are likely to result in a smaller European supply base that is better aligned to serve future local demands. Chinese markets are slowly but steadily improving from levels far below pre-pandemic conditions. We continue to monitor the impacts of recent stimulus initiatives and remain watchful for catalysts that could benefit demand during 2025. In packaging markets, we continue to see steady demands with some customer discrimination in favor of affordability.

Peter Mann: Pressures from prolonged trough conditions.

Peter Mann: And the need to reinvest in aging assets or likely to reshape the European chemical industry.

Several peers are following lined up a sales leader and announcing programs to transform their European footprint through asset sales capacity rationalization and other actions.

Peter Mann: These initiatives are likely to result in a smaller European supply base that is better aligned to serve future local demands.

Peter Mann: Chinese markets are slowly, but steadily improving from levels far below pre pandemic conditions.

Peter Mann: We continue to monitor the impacts of recent stimulus initiatives remain watchful for catalysts that could benefit demands during 2025.

Peter Mann: And packaging markets, we continue to see steady demand with some customer discrimination in favor of affordability.

Peter Mann: In building and construction markets U S stimulus programs are driving increased investments in infrastructure.

Unknown Executive: In building and construction markets, U.S. stimulus programs are driving increased investments in infrastructure. and lower interest rates and pent-up demand are expected to provide tailwinds to both industrial and residential activities. Within automotive markets, production slowed during the third quarter as OEMs took seasonal downtime and higher inventories curtailed production. Demand is expected to remain muted during the fourth quarter as customers wait for lower borrowing costs and steeper discounts. And in oxy fuels and refining, we expect that third quarter concerns over weaker demand for fuels in China and strong refinery utilization rates will continue to pressure gasoline cracks.

Peter Mann: And lower interest rates and pent up demand are expected to provide a tailwind to both industrial and residential activity.

Peter Mann: We didn't know what the motive markets production slowed during the third quarter as Oems took seasonal downtime and higher inventories curtailed production.

Peter Mann: Demand is expected to remain muted during the fourth quarter as customers wait for lower borrowing costs and steeper discounts.

Peter Mann: And then it looks as if he was a refining we expect the third quarter concerns over a weaker demand for fuels in China and strong refinery utilization rates will continue to pressure gasoline crack spreads.

Unknown Executive: margins are likely to be further constrained by lower seasonal demand. Our focus remains on strong operations and optimization across our global footprint to capture market opportunities. And as Michael emphasized, we are laser-focused on robust, long-term cash conversion.

Peter Mann: Margins are likely to be further constrained by lower seasonal demands.

Peter Mann: Our focus remains on strong operations and optimization across our global footprint to capture market opportunities.

Speaker Change: And as Michael emphasized we are laser focused on our robust long term cash conversion.

Speaker Change: Now, let me summarize our outlook and our long term strategy on slide 18.

Peter Vanacker: Now let me summarize our outlook and our long-term strategy on slide 18. The third quarter proved to be more challenging than expected, with markedly lower oxyfuels and refining margins only partially offset by improved North American olefins margins. Given the lower third quarter results, we now expect that our profitability for the second half of the year will be lower than our first half results. During the fourth quarter, we expect the impacts from slow global growth will be compounded by softer seasonal demand. Despite these challenges, our North America and Middle East integrated polyolefins production should benefit from low natural gas and ethane prices relative to higher cost oil-based production in other regions.

Speaker Change: The third quarter proved to be more challenging to unexpected.

Speaker Change: With market, leading lower oxy fuels refining margins only partially offset by improved North American olefins margins.

Speaker Change: Given the lower third quarter results.

Speaker Change: We expect that our profitability for the second half of the year will be lower than our first half results.

Speaker Change: During the fourth quarter, we expect the impacts from slower global growth will be compounded by softer seasonal demand.

Speaker Change: Despite these challenges or North America, and Middle East integrated Polyolefin production should benefit from low natural gas and ethane prices relative to higher cost oil based protection in other regions.

Speaker Change: Against this backdrop, we remain focused on disciplined capital allocation and working capital management.

Peter Vanacker: Against this backdrop, we remain focused on disciplined capital allocation and working capital management. Our clear investment criteria and resilient core businesses allow us to remain focused on executing our strategy throughout the cycle. The company's balance sheet is in great shape and we are well positioned to capture opportunities as they arise. We are upgrading our portfolio through our European strategic review and the exit of our refining business. At the same time, we are growing our capabilities to create sustainable value through investments in Germany and additional plans underway for Texas. And our value enhancement program is on track to unlock at least $600 million of recurring annual EBITDA by year end 2024 and $1 billion of recurring annual EBITDA by the end of 2025.

Speaker Change: Our clear investment criteria, the resilient core businesses.

Lois to remain focused on executing our strategy throughout the cycle.

Speaker Change: The company's balance sheet is in great shape, and we are well positioned to capture opportunities as they arise.

Speaker Change: We are upgrading our portfolio through our European strategic review and the exit of our refining business.

Speaker Change: At the same time, we are growing core capabilities to create sustainable value through investments in Germany, and additional plans underway for Texas.

Speaker Change: I know, we're a value enhancement program is on track to unlock at least $600 million of recurring annual EBITDA by year end 'twenty 'twenty, four and $1 billion of recurring annual EBITDA by the end of 2025.

Speaker Change: Our strategy will not only grow our company, but will also reshaped our business portfolio to improve profitability and create sustainable competitive advantages I am proud to lead this dedicated team as we take decisive actions to unlock value.

Peter Vanacker: Our strategy will not only grow our company, but will also reshape our business portfolio to improve profitability and create sustainable competitive advantage.

Peter Vanacker: I am proud to lead this dedicated team as we take decisive actions to unlock value, reshape LOIB, and position our company for sustainable future success.

Speaker Change: Reshape Hello, I, B and position our company for sustainable future success.

David Kinney: So with that, we are pleased to take your questions.

Speaker Change: So is that we are pleased to take your questions.

Yeah.

Speaker Change: Thank you, Sir and 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.

Operator: Thank you, sir. And ladies and gentlemen, at this time, we will begin the questioning. As a reminder, if you have a question, please press the star followed by the 1. If you would like to withdraw your question, please press the star followed by do ask you to limit.

Speaker Change: If you would like to withdraw your question. Please press the star followed by the two.

Speaker Change: We do ask you to limit to one question.

Speaker Change: Our first question comes from the line of Vincent Andrews with Morgan Stanley.

Vincent Andrews: Our first question comes from the line of Vincent Andrews with Morgan Stanley.

Vincent Andrews: Please proceed. Thank you and good morning, everyone. I wanted to follow up on some of the comments that were made about the North American polyathlete market, and in particular, I believe it was stated that October has the strongest orders year-to-date, but there were some other comments around the same time about, you know, sort of expecting the typical seasonal slowdown and that sort of hindering potential price achievement. So, you know, there's a little bit of a tension between those two ideas that customers are loading up now and in October, ahead of maybe price declines later on.

Speaker Change: Please proceed with your question.

Vincent Andrews: Thank you and good morning, everyone I wanted to follow up on some of the comments that were made about north American polyethylene market and in particular I believe it was stated that October has.

Vincent Andrews: The strongest orders a year to date, but there were some other comments are around the same time about you know sort of expecting the typical seasonal slowdown in in that sort of are hindering our potential price achievement. So I, you know theres a little bit of a tension between those two ideas that the customers are loading up now and.

In October ahead of maybe price declines later on so what do you think is causing that that strength in orders that you are having the best order book of any months or a year in October.

Peter Vanacker: So what do you think is causing that strength in orders that you're having the best order book of any month of the year in October? Good question, Vincent. Thank you very much. I think we need to look also a little bit to understand October, I mean, to September. You know, September was a little bit slower, compared, I mean, to the two months before. So there's a bit of an overhang in orders from September that we actually see coming in October.

Speaker Change: Good question Vincent Thank you very much.

Speaker Change: I think we need to look also a little bit to understand October into September.

Speaker Change: Timber was a little bit slower.

Speaker Change: Compared to the two months before.

Speaker Change: So there's a bit of an overhang and orders from September that we actually see coming in October.

Peter Vanacker: But as I said, I mean, we do expect them in the seasonality, as usual, towards the end of the year, November and December, that there will be working capital management along the value chain.

Speaker Change: That said I mean, we do expect I mean the seasonality.

Speaker Change: As usual towards the end of the year in November and December.

Speaker Change: That there will be working capital management, along the value chain with.

Kim Foley: With that, Kim, anything you want to add? I would just make a couple additional comments, Peter, specifically around North America. I mean, as we alluded to in our prepared remarks, right, you saw a feedstock advantage with ethane going into July and August, and then you saw industry down, so you saw a spike in ethylene price that challenged integrated margins. So a lot of customers looked at, as they entered September, they looked at, okay, where is ethylene price and integrated margins going to go from where they were? And we also see a falling crude price. So they were optimistic that the crude price would continue to fall and they would see export pricing compete with domestic pricing.

Speaker Change: With that Ken anything you want to add I would just make a couple of additional comments here.

Speaker Change: Specifically around North America, I mean, as we alluded to in our prepared remarks right you saw that.

Speaker Change: But if.

Speaker Change: Feedstock advantage with ethane and going into July and August and then you saw industry down. So you saw a spike in ethylene price it challenge to integrated margins. So a lot of our customers looked at as the energy September they looked at Okay, where is the ethylene price in integrated margins going to go from where.

Speaker Change: They were and we also see a falling crude price so they they were optimistic.

Speaker Change: The crude price would continue to fall and they would say export pricing compete with domestic pricing and as you've seen over the last couple of weeks. The crude pricing has stabilized more and you continue to see their demand is there for both exports as well as domestic so that's why there is that tension and that is why October so strong.

Kim Foley: And as you've seen over the last couple of weeks, the crude pricing is stabilized more. And you continue to see the demand is there for both exports as well as domestic. So that's why there's that tension, and that's why October is so strong.

Speaker Change: Yes.

Speaker Change: Yeah.

Unknown Executive: Thank you.

Speaker Change: Thank you.

Patrick Cunningham: Our next question comes from the line of Patrick Cunningham with Citi. Hi, good morning. I think Aaron alluded to the volatility and PO and derivatives. Now that you're running a new asset fully, how much of the decline in the quarter was related to unplanned downtime versus weaker variable margin? And what were overall operating rates in the quarter? And then in terms of 4Q, do you still expect similar levels of maintenance here? Or is that an additional drag sequentially? Yeah, thank you. Thank you for the question, Patrick, I'd say, listen, despite the challenging market environment, the positive takeaway is that sales are up 4% globally year over year through through the third quarter, with all of the growth really coming from Europe and the US.

Speaker Change: Our next question comes from the line of Patrick Cunningham with Citi. Please proceed with your question.

Patrick Cunningham: Hi, Good morning, I think Aaron alluded to the volatility in Po and derivatives and now that youre running the new asset fully how much of the decline in the quarter was related to unplanned downtime versus weaker variable margin. While we're overall operating rates in the quarter and then in terms of <unk> you still expect similar levels.

Patrick Cunningham: Maintenance here or is that an additional drag sequentially.

Speaker Change: Yeah. Thank you. Thank you for the question, Patrick I'd say listen despite the challenging market environment.

Speaker Change: The positive takeaway is that sales are up 4% globally year over year through through the third quarter with all of the growth really coming from Europe and the U S.

Aaron Ledet: Higher propylene prices in the U.S. are actually limiting exports to Asia, so you see that impacting our operating rates. And as we look to the fourth quarter, that's where the quote of 75% comes from. That is impacted, as mentioned in my planned remarks, by the Bayport turnaround, which we've just recently started up here at the end of October. As we look forward, we're still optimistic that the interest rate reductions and the stimulus packages will have some favorable impact on durable demand, but it's not likely to occur in 2024.

Speaker Change: Higher propylene prices in the U S are actually limiting exports to Asia. So you see that impacting our operating rates and as we look to the fourth quarter, that's where the quote of 75% comes from that is impacted as mentioned in my planned remarks by the Bay Porte turnaround, which we've just recently started up.

Speaker Change: Here at the end of October.

Speaker Change: As we look forward, we're still often optimistic that the interest rate reductions and the stimulus packages will have some favorable impact on durable demand, but it's not likely to occur in 'twenty 'twenty four.

David Begleiter: Thank you. Our next question comes from the line of David Begleiter with Deutsche Bank, please proceed with your question. Thank you, good morning.

Speaker Change: Yeah.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of David Begleiter with Deutsche Bank. Please proceed with your question.

David Begleiter: Thank you good morning, Peter just on polyethylene pricing do you expect polyethylene prices to decline in the fourth quarter.

Peter Vanacker: Peter, just on polyethylene pricing, do you expect polyethylene prices to decline in the fourth quarter? Hi, David. Good question, of course. Yeah, and I'm gonna pull up my crystal ball. You know that we have two additional price increases in the markets, three cents per pound for October, three cents per pound for November.

Peter Mann: Hi, David Good question of course, yeah, and I'm going to pull out my Crystal ball.

Peter Mann: Know that we have to at least from our price increases and the markets are three cents per pound for October three cents per pound for November.

Peter Mann: A bit premature to say because at the beginning of November as you know our discussions are ongoing to see if price increases will be successful or not.

Peter Vanacker: A bit premature to say because at the beginning of November, as you know, discussions are ongoing to see if price increases will be successful or not. If I look at the underlaying demands, and Kim alluded to that. domestic U.S. demand being up by 6%. year to date being up by 4% compared to last year. Capacity utilization. Yeah, about 85%. exports up by 11 percent. um good demands uh in october that we just explained or kim explained So we remain hopeful that we will see part of the price increases go through. But, as said, it remains to be seen because these discussions are currently ongoing.

Peter Mann: If I look at the underlying demands and Kim alluded to that.

Peter Mann: The domestic U S demand being up by 6%.

Peter Mann: Yeah, the year to date being up by 4% compared to last year capacity utilization above.

Peter Mann: About 85%.

Peter Mann: Exports up by 11%.

Peter Mann: Good demands.

Peter Mann: So over that we just explained or can explains.

Peter Mann: So we remain hopeful that we will see part of the price increases go through.

Peter Mann: But that said it remains to be seen because these discussions are currently ongoing.

Peter Mann: Thank you.

Unknown Executive: Our next question comes from the line of Jeff... Morgan. Thanks very much.

Speaker Change: Our next question comes from the line of Jeff Zekauskas with J P. Morgan. Please proceed with your question.

Jeff Zekauskas: Thanks very much.

Jeff Zekauskas: I think on your analyst day in 2023.

Peter Vanacker: Think on your analyst day in 2020. LyondellBasell Industries NV Normalized EBITDA of the U.S. Polly Olson Ian Oliphant's and Polly Oliphant's business was seven. Since that. You know, there have been China Europe's energy prices have, you know, come up. What do you think is the normalized? Jeff, what I'd say is that the number for our North American businesses is largely unchanged.

Jeff Zekauskas: You thought that or lyondell thought.

Jeff Zekauskas: Normalized EBIT D a.

Jeff Zekauskas: U S olefins, <unk> polyolefin business and European office and polyol.

Jeff Zekauskas: With $7 billion.

Jeff Zekauskas: And since that time, you know there have been capacity additions.

Jeff Zekauskas: China has slowed down.

Speaker Change: Uh huh.

Speaker Change: Europe's energy prices.

Speaker Change: You know come up I think Hugh you want to exit part of your European business.

Speaker Change: What what do you think is the normalized EBIT da.

Speaker Change: The us and European business now is it still seven or is it a different number.

Speaker Change: Jeff what I'd say is.

The number for our North American business is largely unchanged.

Peter Vanacker: When we did our analyst day, we probably didn't have full visibility as to what is going on in Europe. And so I think as we sit here today, if you think about, you know, what's going on in Europe with higher cost energy and the regulatory environment that, yeah, probably Europe, the earnings power is a little bit lower than it had been in the past. I think there's a lot of moving parts in the macroeconomics that you also have to contemplate, you know, what will happen with China's stimulus. and will it be able to consume the new capacity they bring online?

Speaker Change: When we did our when we did our analyst day, we probably didn't have full visibility as to what is going on in Europe and.

Speaker Change: And so I think as we sit here today. If you think about you know what's going on in Europe with higher higher cost of energy and the regulatory environment that yeah, probably Europe.

Speaker Change: The earnings power is a little bit lower than it had been in the past.

Speaker Change: I think there's a lot of moving parts in the macroeconomics that you also have to contemplate you know what will happen with China stimulus.

Speaker Change: And will it be able to consume the new capacity. They bring online what will happen is the ear starts to rationalize you've seen some of the announcements out there and then in North America you have to remember you know, it's the lowest cost from a feedstock.

Peter Vanacker: What will happen is the EU starts to rationalize. You've seen some of the announcements out there. And then in North America, you have to remember, you know, it's the lowest cost from a feedstock perspective, for sure, region of the world. And we have no new ethylene capacity coming online for a few years. So you have to take all that in consideration as well.

Stock perspective for sure region of the World and we have no new ethylene capacity coming online for a few years. So you have to take all that in consideration as well.

Peter Vanacker: And the other part that I want to add to that is, of course, our big transformation that we are going through. you know, the elements that we have with the exit of the refining on one hand side, but especially also the European assessment that is currently ongoing, and then our investments in the Middle East. So our portfolio of the past is not going to be the same as our portfolio in the future. We're repositioning in Europe, as you know, leveraging also upon the demand from the OEMs, the brand owners in circular and renewable solutions. We're doing the necessary investments in our Cologne hub.

Speaker Change: And the other part that I want to add to that ease of course over a big transformation that we're going through.

Speaker Change: You know deal it means that we have with the exit of the refining on one inside but especially also the European assessments that is currently ongoing and then over at investments.

Speaker Change: In the middle East So all of our portfolio.

Speaker Change: Over the past, there's not going to be the same as our portfolio.

Speaker Change: Future.

Speaker Change: We're repositioning.

Speaker Change: In Europe.

Speaker Change: As you know leveraging also upon the demands from the Oems the brand owners and circular and renewable solutions, we're doing the necessary investments in our Cologne hub.

Peter Vanacker: We see that regulation is moving in Europe in the right direction. We're building up low cost delivered positions in the Middle East. So that means that our future portfolio of cost advantage operations will move from about 60% to 70%.

Speaker Change: We see the regulation is moving in Europe in the right direction.

Speaker Change: We're building a low cost delivery positions are in the middle East So that means that our future portfolio of cost advantage operations will move from about 60% to 70%.

Speaker Change: Thank you.

Aleksey Yefremov: Our next question comes from the line of Aleksey Yefremov.

Speaker Change: Our next question comes from the line of Aleksey, you're familiar with Keybanc capital markets. Please proceed with your question.

Aleksey Yefremov: Thank you. Good morning. I wanted to ask about your APK acquisition. That's our APK.

Speaker Change: Thank you good morning, I wanted to ask you about your ATK acquisition I'm, sorry P. K.

Peter Vanacker: What's the degree of maturity of this technology and is it ready for additional investments for capacity expansions perhaps in the near future? Hey, Aleksey, thank you for your question. Well noticed, I mean, that we have no full ownership over the company APK. We're very pleased, I mean, with that acquisition because We had expanded our entire portfolio of renewable and circular solutions leveraging upon different technologies. from Waste-Based Renewable Hydrocarbons. to Mechanical Recycling, to our MORETEC technology, which is an Advanced Chemical Catalytic Recycling Technology. And now we also have, with APK, a solution-based recycling technology, which allows especially laminated films to be recycled.

Speaker Change: Well, what's the degree of maturity of this technology and isn't ready for additional investments for capacity expansions, perhaps in the near future.

Speaker Change: Yeah, let's see thank you very question well noticed I mean that we have no Ah full ownership over the company a T. K, we're very pleased to meet with that acquisition because.

Speaker Change: We had expanded over our entire portfolio of renewable and circular solutions leveraging up on different technologies.

From waste based renewable hydrocarbons.

Speaker Change: Two mechanical recycling two or more ethic, a technology, which is an advanced chemical catalytic recycling technology.

Speaker Change: Though we also have with ATK solution based recycling technology, which allows especially laminated films.

Speaker Change: To be recycled.

Peter Vanacker: So we're in the process of integrating that company. We've acquired them because we see a huge benefit that they have because they are, in our view, the most. Advanced Technology Company in terms of solution-based recycling. So of course, as we are integrating them, we have a plan behind it in which one may compare a bit, I mean, to our more tech investments. So looking at applying the technology, looking at scaling up the technology.

Speaker Change: So we're in the process of integrating that company.

Speaker Change: We've acquired them because we see a huge benefits that they have because they are an overview the most.

Speaker Change: Defense.

Speaker Change: Technology company in terms of the solutions that solution based recycling.

Speaker Change: So of course as we are integrating them, we have a plan behind it and which one may compare a bit I mean, two or more of a tick investments. So looking at applying the technology looking at scaling up to technology. So if you fast.

Joshua Spector: So if you fast forward it, I mean, to 2030, it will be an integral part of our total offering that we have to brand owners and OEMs. Our next question comes from the line of Josh Spector with UBS. Hey, good morning. I wanted to ask a more longer term question about the US asset mix over time. So, if you look at your cracker feed that you disclosed in this last quarter, you're about, you know, 95% light between NGLs and ethane.

Speaker Change: Forward it to 2030, it will be an integral part of our total offering that we have two Brent onerous and Oems.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Josh Spector with UBS. Please proceed with your question.

Yeah, Hi, good morning, I wanted to ask a more longer term question about the U S. As that mix over time. So if you look at your cracker feed that you disclosed in this last quarter, you're about 95% of light between Ngls and ethane I guess as you look at converting the refinery site and you talked about.

Peter Vanacker: I guess as you look at converting the refinery site, and you talked about bio-based feedstocks, others recycle it based feedstocks, and what you're building yourself, what do you view as that cracker mix being, call it five, six years from now? And assuming that's higher in terms of heavier feed tomorrow versus today, that's going to de-rate your crackers a little bit on the ethane or ethylene side. Would you invest to maintain that or would you accept that shift as part of that change? Thanks.

Speaker Change: A bio based feedstocks, others recycle that they'd feedstocks and what you are building yourself, what do you view as that cracker mix being call. It five six years from now and assuming that is higher in terms of heavier heat tomorrow versus today, that's gonna Derate your crackers, a little bit on the ethane or ethylene.

Speaker Change: Todd would you invest to maintain that or would you accept that shift as part of that change. Thanks.

Speaker Change: Yeah.

Peter Vanacker: Yeah, hi, Joss. Very good question. Of course, the first thing that I want to outline and then I hand over to Kim is with the transformation that we're doing on the refining side, we are coming from the market. So we're coming from the demand that is coming from brand owners OEMs through the value chain to us. Demands for Renewable and Circular Solutions. And as we are looking at that demand and how it is growing, mid to long term, that's how we are basing, of course, our asset strategy and the investments of, for example, a Morotec 2 facility with upgrading capacities to the hydrotreaters, as we alluded to in the prepared remarks.

Speaker Change: Yeah, Hi, just a very good question of course, the first thing that I want to outline and then I hand over to Kim as well.

With the transformation that we're doing on the refining side.

Speaker Change: We are coming from the markets so were coming from the demand that is coming.

Speaker Change: From brands owners Oems through the value chain.

Us.

Demand for renewable and circular solutions.

And as we are looking at that 10 months and how it is growing mid to long term. That's how we are basing of course or asset strategy and the investments Hope for example, a more to take two facility with upgrading capacities to the hydro treaters as we alluded through too.

Speaker Change: And in the prepared remarks.

Kim Foley: So it comes from demand, how we are ramping up, I mean, those capacities. And of course, those capacities, those liquid fractions, with, of course, also due to our Morotech technology, there's also a gas fraction, will be fed in to our crackers, especially, I would say, the one that we have in ChannelView. So it's not that we're coming from ChannelView and we're changing the mix in the cracker, but we're coming from the market and building up our Morotech technology to then see how can we actually feed it in into our crackers and capture that margin that we have alluded to in the capital market, say, the incremental margin over time.

Speaker Change: It comes from demand, how we are ramping up I mean, those capacities and of course those capacities those liquid fractions.

Speaker Change: Of course also due to our.

Speaker Change: Morris technologies. There was also a gas fraction will be fed in to all of our crackers, especially I would say the one that we have in channel view. So it's not that we're coming from channel view on where it's changing the mix and the cracker, but were coming from the market and building up or more it takes technology to density how can we ask.

Speaker Change: Defeated and into our crackers.

Speaker Change: And capture that margin that we have alluded to in the capital markets say the incremental margin.

Speaker Change: Overtime.

Kim Foley: Want to add something? Just a couple of comments. Thanks for asking, Josh, because it gives us the opportunity to, again, re-emphasize, this is a small investment to get into these product lines, these advanced circular product lines, by just putting a front end to our existing liquid flexible crackers. When we think about how we operate in North America, I also want to reiterate, it's always about optimization. What we look at or refer to as our cost of ethylene. So, yes, could we run 100% ethane at Channelview? Yes, we could, but we won't, because it's more profitable for us to run some NGLs, just like it will be more profitable for us to look at the feed slate, as we better understand the different feedstocks that will come in from circularity.

Speaker Change: Can you want to add something.

Speaker Change: Yeah, just a couple of comments so yeah. Thanks for asking Josh because it gives us the opportunity to again reemphasize. This is a small investment to get into these if these product lines. These advanced circular product lines, but just putting a front end to our existing liquid flexible crackers.

Speaker Change: Alright, So you know when we think about how we operate North America I also want to reiterate it's always about optimization. What we look at are referred to as our cost of ethylene. So yes could we run 100% ethane that channel, though yes, we could but we won't because we it's more profitable for us to run some ngls just like it will be more profit.

Well for us to look at the feed slate as we better understand the different feedstocks that will come in from circularity. So it think its a great question I really appreciate it and I would just highlight we have tremendous feedstock flexibility and the opportunity to get into a new market in a low cost way one of the beauties I mean that I think is.

Peter Vanacker: So, I think it's a great question. I really appreciate it, and I would just highlight, we have tremendous feedstock flexibility and the opportunity to get into a new market in a low-cost way. One of the beauties, I mean, that I think is in our strategy, Josh, is also the fact that, like Kim alluded to, it's a relatively small investment when you compare it to having to invest in a complete new cracker with everything around it. So, it's a leveraging upon our existing infrastructure. And CO2 emissions are also included, of course, in the steel and iron that you're building.

Our strategy.

Speaker Change: <unk> is also the effect.

Speaker Change: Like Kim alluded to let's say a relatively small investments when you compare it to having to invest in a complete new cracker with everything around it so it's a leveraging upon or existing infrastructure.

Speaker Change: C. O. Two emissions are also included of course in the steel and iron that you're building.

Peter Vanacker: So, leveraging upon the existing infrastructure that we have and mainly focusing on what do we need to add. So, waste sorting is something that we need to add. Advanced chemical recycling is something that we need to add with our proprietary technology, the Morotec technology. We don't need to add amine hydrotreaters in Houston because we have them. We just need to modify them. So, the investment compared to a fully blown up new cracker is substantially lower and it allows you to be in a market that allows us to be in a market with low carbon footprint molecules up to net zero.

Speaker Change: So leveraging up on the existing infrastructure that we have and mainly focusing on what do we need to act.

Speaker Change: So waste sourcing is something that we need to add.

Advanced chemical recycling is something that we need to absolutely what where appropriate as a REIT technology. The <unk> technology, we don't need to add I mean hydro treaters in Houston, because we have been we just need to modify it and so the investment compared to a fully blown up new cracker is substantially lower and it allows you to be in the market that allows us to.

It'll be in the market.

Speaker Change: Low carbon footprints molecules up to near zero.

And at the same time also circular products.

Peter Vanacker: and at the same time also circular product.

Speaker Change: Okay.

Speaker Change: Thank you.

Frank Mitsch: Our next question comes from the line of Frank Mitsch with Fermium Research. Thank you and good morning.

Speaker Change: Our next question comes from the line of Frank Mitsch with Fermium Research. Please proceed with your question.

Thank you and good morning.

Peter Vanacker: Peter, I was wondering if you could provide an update on the timeline in terms of the European restructuring. And to that end, did I understand you correctly that following this process, your expectation is that your European operating rates would increase by 10%? If you could talk a little bit about what's going on, what's your outlook for your European operating rates, and again, on the restructuring actions you're taking there. Thank you. Thank you, Frank. Good question.

Frank Mitsch: Peter I was wondering if you could.

Frank Mitsch: Provide an update on the timeline in terms of the European restructuring and to that end did I understand you correctly that that following this process. Your expectation is that your European operating rates would increase by 10%. If you could talk a little bit about whats going on whats your outlook for your European operating rates and again on the restructuring.

Speaker Change: So you're taking there. Thank you yeah. Thank you Frank good question.

Peter Vanacker: First that I would like to highlight is Like some of us here around the table, I'm now, what, around 35 years in the chemical industry. I've seen multiple cycles in the chemical industry. This is actually the first time in my career that I have seen that people are not just talking about restructuring and taking capacities out in a certain region, but it's actually happening and it's happening faster that I believe that anybody, including advisors, consultants have anticipated. We are now somewhere between two and two and a half million tons, depending on what timeline you take, of Italy in capacity that has been announced that is being taken out in Europe.

Frank Mitsch: Yeah.

Speaker Change: Firstly I would like to highlight is.

Speaker Change: Like some of us here around the table.

Speaker Change: No one around 35 years in the chemical industry I've.

Speaker Change: I've seen multiple cycles in the chemical industry.

This is actually the first time in my career today have seen that people are not just talking about restructuring and taking capacity out in a certain region, but it's actually happening and it's happening faster that I believe that anybody including the advisors consultants have anticipated.

Speaker Change: We are now somewhere between two and two and a half million tons, depending on what timeline you take.

Speaker Change: It'll in capacity that has been announced that is being taken out in Europe.

Peter Vanacker: and some consultants have alluded to the fact that there should be somewhere around two and a half three million tons I mean to have again a balanced market. So it is in that environment that we have very early at an early stage started with the European assessment and made the corresponding announcements. So at this point in time, we are in the markets. We are looking at several opportunities. And we've alluded to that as well before that can be selling the entire package of five sites. NONP, It can also be restructuring those sites, it can also be...

Speaker Change: And some consultants have alluded to the fact that there should be somewhere around two and a half 3 million tons I mean to have again, a balanced markets. So it is in that environment.

Speaker Change: We have very early at an early stage startup with a European assessment and make the corresponding announcements.

Speaker Change: So at this point in time, we are in the markets.

Speaker Change: We are looking at several opportunities.

Speaker Change: And we've alluded to that as well before that can be selling the entire package of the five sites.

Speaker Change: N O N E.

Speaker Change: It can also be a restructuring those sites. It can also be.

Peter Vanacker: selling one or two or three sites or selling them separately. So we are in the markets and we're expecting that we will get in 2025 quite a lot of clarity. So, of course, as usual, we'll keep you informed about the progress, but it will take a little bit of time. These things, they don't go, as you know, I mean, from today to tomorrow. What I was alluding to before the 60 to 70 percent is not because of capacity utilization or what. I mean, I was saying that if you look at the total portfolio. that LyondellBasell has in terms of cost advantaged operations, so cost advantaged assets.

Speaker Change: Selling a one or two or three sites or setting them separately. So we are in the markets.

Speaker Change: And we're expecting that we will get in 2025 quite a lot of clarity. So of course as usual, we'll keep you informed about the progress, but it will take a little bit of time. These things. They don't go as you know I mean from today to tomorrow.

Speaker Change: What I was alluding to before the 60% to 70% is not because of capacity utilization or what I mean.

Speaker Change: We're saying that if you look at the total.

Speaker Change: The total portfolio.

Speaker Change: That lined up ourselves has in terms of cost advantaged operations, so cost advantaged assets too.

Peter Vanacker: Today, this is around 60%. That is cost advantage assets. After exiting the refinery. and modifying it for our recycled renewable products. And after having exited the six operations that we talked about in Europe, that then our portfolio would consist out of 70% cost advantaged operations. So the remaining 30% of costs of the remaining 30% is pretty much assets that are serving our renewable and recycled strategy.

Speaker Change: Today. This is around 60% that is cost advantaged assets.

Speaker Change: After exiting the refinery.

Speaker Change: And modifying its four or recycled or renewable products.

Speaker Change: And after having exited the six operations that we have talked about in Europe that done or portfolio would consist out of <unk>.

Speaker Change: 70%.

Cost advantaged operations. So the remaining 30% of costs. The remaining 30% is pretty much assets that are serving or renewable and recycled strategy.

Speaker Change: Thank you Frank Congrats on the jet speeding the Texans.

Mike Sison: Frank, congrats on the Jets beating the Texans. Thank you. Our next question comes from the line of Mike Sison with Wells Fargo. Hey, good morning, guys. So if you think about polyethylene this year, integrated margins have done really well. You know, I'm doing 30 cents per pound range, costs are low, and as you've noted, it sounds like demand. pretty good.

Frank Mitsch: Thank you.

Speaker Change: [laughter].

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: It comes from them.

Mike.

Speaker Change: Phone with Wells Fargo. Please proceed with your question.

Speaker Change: Hey, good morning, guys.

Speaker Change: So if you think about polyethylene this year integrated margins have done really well and then 30 cents per pound range costs are low.

Speaker Change: And as you've noted it sounds like demand is pretty good.

Peter Vanacker: So what needs to get better, I guess, in 2025? for OP Americas to grow EBITDA, given how well, seems like Polyethylene has generally done well this year. Well, Mike, first of all... Demands need to continue to go up in PE. Today, demand by PE, demand growth, I mean, by PE is not so much related, I mean, to durable goods. As inflation rates have gone down, as interest rates were expected to continue to go down, then we would hope that that will have an impact on consumer confidence. buying of apartments, houses for the construction business would go up.

Speaker Change: So what what needs to get better I guess in 2025 mm.

Speaker Change: Four O P Americas to grow EBITDA, given how well it seems like that polyethylene is generally done well.

Speaker Change: This year.

Speaker Change: Yeah.

Speaker Change: That's my first of all.

Speaker Change: Demands.

Speaker Change: We need to continue to go up.

Speaker Change: N P E today demand by P. E group demand growth I mean, he is not so much.

Speaker Change: Related I mean to durable goods.

As inflation rates have gone down.

Interest rates are.

Speaker Change: Spect it to continue to go down then we would hope that that will happen impact on consumer confidence.

Speaker Change:

Buying of apartments houses so the construction business would go up and that would have a benefit of course, both to the <unk> business as well as the PB business plus in addition to that of course.

Peter Vanacker: And that would have a benefit, of course, both to the PE business as well as the PP business. Plus, in addition to that, of course, also Aaron's propylene oxide business.

Speaker Change: Also parents propylene oxide business.

Peter Vanacker: So the other thing I want to allude to as well is if you look at. Year-to-date this year, the Delta and EBITDA versus year to date last year? Well, about 70% of that delta is coming from the refining business.

Speaker Change: So the other thing I want to allude to as well is if you look at.

Speaker Change: Year to date this year the delta in EBITDA.

First is year to date last year.

Speaker Change: Well about 70% of that Delta is coming from the refining business.

Speaker Change: Yeah.

Peter Vanacker: So next year, we are exiting the refining business. that will be discontinued operations so that will not be in the mix anymore which gives you an indication as well that the rest of the business is compared to last year despite the fact that we haven't seen Durable Goods Picking Up. Europe still being in a crisis. China not having picked up. has been relatively stable. So and the other 30% is pretty much I mean, related, then, of course, also to the impact that lower gasoline cracks have on the oxy fuels business.

So next year, we are exiting the refining business.

Speaker Change: That will.

Speaker Change: It'd be discontinued operations, so that will not be in the mixed anymore.

Speaker Change: Which gives you an indication as well that the rest of the businesses compared to last year. Despite the fact that we haven't seen.

Speaker Change: Durable goods picking up.

Speaker Change: Europe still being in a crisis, China, not having picked up.

Has it been relatively stable so.

Speaker Change: Hum.

Speaker Change: And the other 30% is pretty much I mean related then of course also to the impact that the lower gasoline cracks have.

Speaker Change: On the oxy fuels business.

Speaker Change: Thank you.

Kevin Mccarthy: Our next question comes from the line of Kevin McCarthy with Good morning, thanks very much. Maybe a two part question on your refining transition. First, appreciate the detail on slide 13. Nice to see the net cash flow contribution. One question would be as you as you throttle down on refining, should we anticipate any earnings impact on your other segments? Just thinking about Products, Co-Products, Utilities that may move across the fence, so to speak. And then secondly, as you... So think about what you're purchasing. Nothing material there.

Speaker Change: Our next question comes from the line of Kevin Mccarthy with vertical Research partners. Please proceed with your question.

Kevin Mccarthy: Yes. Good morning, Thanks, very much maybe a two part question on your refining transition first I appreciate the detail on slide 13, nice to see the net cash flow contribution what one question would be as you as you throttle down on refining should we anticipate any earnings impact on your other cell.

<unk> just thinking about.

Kevin Mccarthy: You know products co products utilities that may move across our across the fence. So to speak and then secondly are you know as you.

Kevin Mccarthy: The other thing that is maturing.

Speaker Change: Nothing material there.

Unknown Executive: Okay, good.

Peter Vanacker: Okay, and then if I may, are you still looking at a final investment decision on MoorTech 2 by March or so, Peter? No, it doesn't go that fast, Kevin. I mean, hope it goes that fast, but it doesn't go that fast.

Speaker Change: And then if I if I may are you still looking at a final investment decision on more tech to by March or so Peter.

Peter Mann: No it doesn't go get past Kevin.

Speaker Change: But those that fast, but it doesn't go that fast.

Peter Vanacker: So, what we would look at, I mean, in first quartile next year, is that we make one important step. The first step, let's say, in the investment cycle, this is not a final investment decision yet, but it's the first step which would lead, of course, and also to starting to order long-lead items, preparing the grounds, do some infrastructure, etc., etc.

Speaker Change: So.

Speaker Change: The what we would look at I mean in first quartile next year is that we make one important step.

Speaker Change: The first step, let's say in the investment cycle. This is not a final investment decision yet.

Speaker Change: But it's the first step which would lead of course and also to starting to order long lead items preparing the ground.

Speaker Change: Do some infrastructure et cetera et cetera.

Peter Vanacker: FID, I would, for the final step, I would expect that to happen in 2026.

Speaker Change: If I D.

Speaker Change: So the final step I would expect that to happen.

Speaker Change: In 2026.

One thing already that I want to outline our bits here is that over investment strategy has changed and we are in.

Peter Vanacker: One thing already that I want to outline a bit here is that our investment strategy has changed. And we're in Our concept is a modular concept that we have, which is something we are applying in the first MRT investment in Cologne. And we would do the same in the second investment in Houston. So that means if we make That step on deciding on the first step for Houston, it already is an important commitment. It's intrinsic, I mean, to the nature of doing modular investments.

Speaker Change: Our concept is a model or a concept that we have which is something we are applying.

Speaker Change: In the first and Mark T investment in Cologne.

Speaker Change: And we would do the same in the second investments in Houston, So that means if.

Speaker Change: If we make.

Speaker Change: That said when deciding on the first step for Houston. It already is an important commitments.

Speaker Change: Its intrinsic I mean to the nature of doing a muddle or investments. So it is a higher commitment already in terms of total capex.

Hassan Ahmed: So it is a higher commitment already in terms of total cap Our next question comes from the line of Hassan Ahmed with Alambe Morning, Peter. You know, just wanted to go back to the European review, you know, several questions obviously asked about that. I mean, you know, since you guys obviously announced the review, and you know, clearly, you guys were amongst the first to do so, you know, more and more companies are coming out and doing that.

Thank you.

Speaker Change: Our next question comes from the line of Hassan Ahmed with Alembic Global. Please proceed with your question.

Speaker Change: Morning, Peter I just.

Hassan Ahmed: Just wanted to go back to the European review several questions. So I'll just be honest about duck.

Hassan Ahmed: You know since you guys, obviously announced the review and and you know you clearly you guys were amongst the first to do so you know more and more companies are coming out and doing that and I'm still sort of you know trying to sort of understand how you guys will create value doing that you know how you balance out.

Peter Vanacker: And I'm still sort of, you know, trying to sort of understand, you know, how you guys will create value doing that, you know, how you balance out sort of asset sales, presumably, now, there will be more and more of a glut of assets, you know, you know, being set up to be sold out there. So I would imagine pricing would go down because of that. And obviously, Europe being Europe, you know, shutdowns can be quite pricey over there. So I mean, how do you think about the calculus behind that? But Hassan, if I look at the announcement that so far have been made in the industry for Europe, then the two million tons or two and a half million tons, depending on the timeline you take, that I have mentioned before, or shut down.

Hassan Ahmed: Asset sales, presumably now there will be more and more of a lot of assets. You know you know being set up to be sold out there. So I would imagine pricing would go down because of that and obviously Europe being euro you know shut downs can be quite pricey over there. So I mean, how do you think.

Hassan Ahmed: The calculus behind that.

Hassan Ahmed: But if I look at you know some of that so far have been made.

Hassan Ahmed: In the industry for Europe.

Hassan Ahmed: And then the 2 million tons or two and a half million tons, depending on the timeline you take that.

Hassan Ahmed: I have mentioned before or shutdowns.

Peter Vanacker: Yes, so they have been announced as these assets will be shut down. The assets that we are talking about in our portfolio are are not bad assets. I mean, they are good assets. They are like take bear, for example, is a flexible cracker. Yeah, it has integrated, I mean, polymerization next to it. So has a good location from a logistic point of view. It has the preferential electricity costs because of the nuclear industry that you have in France that is being supported and will, we expect will continue to be supported as well if you look at current discussions on a European level.

Speaker Change: Yeah. So they have been announced as these assets will be shut down.

Speaker Change: The assets that we are talking about and other portfolio.

Speaker Change: Or are not bad assets I mean, they are good assets.

Speaker Change: They are like take bear for example is a flexible cracker.

Speaker Change: Yeah. It has integrated I mean full amortization next to it.

Speaker Change: So.

Speaker Change: That's a good location from a logistics point of view.

Speaker Change: It has the preferential electricity costs because of the nuclear industry that you have in France that is being supported and will we expect will continue to be supported as well. If you look at current discussions on a European level.

Peter Vanacker: So we do believe that there may be good owners, I mean, for those assets. Not necessarily that we are the right owner, I mean, for those assets.

Speaker Change: So we do believe that.

Speaker Change: There may be good owners for those assets.

Speaker Change: Not necessarily that we are the right owner I mean for those assets.

Peter Vanacker: And you'll see the transformation that I mentioned before. Yeah, we are investing and have very good experience in Saudi Arabia. So we continue to progress on that investment strategy in the Middle East.

Speaker Change: And you'll see the transformation that I mentioned before we are investing and have very good experience in Saudi Arabia. So we continue to progress.

Speaker Change: On that investment strategy.

Speaker Change: In the Middle East.

Speaker Change: And what I'd say is that so the process is underway I hope you. All appreciate we can't share an incredible amount of details about there'll be more to share in the new year.

Unknown Executive: And what I'd say is that, so the process is underway, I hope you all appreciate, we can't share an incredible amount of details, but there'll be more to share in the new year. But probably not early.

Speaker Change: But probably not early.

Speaker Change: Yeah.

Kenneth Lane: Thanks. And we have reached the end of Back to Mr. Lane. Thank you all. Of course, as usual, very thoughtful questions. Let me highlight the following. I mean, we continue to make excellent progress on our strategy to make LYB a much more focused company with a leading advantaged asset portfolio and product mix. You heard me saying that a couple of times in this call.

Speaker Change: Thank you.

Speaker Change: And we have reached the end of the question and answer session.

And back to Mr. Li for closing comments.

Mr. Li: Yeah. Thank you.

Mr. Li: Of course as usual a very thoughtful questions.

Mr. Li: Let me highlight the following I mean, we continue to make excellent progress on our strategy to make <unk> a much more focused company with a leading.

<unk> asset portfolio and product mix, you've heard me say and got a couple of times in this call.

Peter Vanacker: Now, 2025 will, for us, be a very important transformational year. Let me highlight a couple of the things that we are executing in 2025. I mean, first, we exit our refining business and we start preparing for the transition into a renewable and circular app. Second, we execute on the European asset assessment. Third, we progress on our first Moritech investment in Germany, and we prepare for the second one in Houston. Fourth, we prepare for carbon value creation projects in our existing large assets, not building new assets, but the existing large assets. And fifth, we continue to further develop our Middle East footprint.

Mr. Li: So 2025, we refer us be a very important transformational year.

Can you highlight a couple of the things that we are executing in 2025.

Speaker Change: First we exited our refining business and we start preparing for the transition into a renewable and circular.

Second we execute on the European assets assessments.

Speaker Change: Third we progressed on over first more of a tech investment in Germany that we prepare for the second one in Houston.

Of course, we prefer for carbon value creation projects and over existing large assets not building new assets, but the existing large assets.

Speaker Change: And fifth we continue to further develop or the middle east footprint. So all of these actions as I mentioned during the call are expected to grow our asset portfolio of cost advantaged operations from the current 60% to 70%.

Peter Vanacker: So all these actions, as I mentioned during the call, are expected to grow our asset portfolio of cost advantaged operations from the current 60% to a 70%. And as we mentioned in the last earnings call, we step up our mid cycle EBITDA margin by doing so. Let me highlight as well that we provided industry leading 6% total capital return yields in Q3 as well. So, of course, we look forward to sharing updates over the coming months as we continue to make progress on all the aspects of our long-term strategy.

Speaker Change: And as we mentioned in the last earnings call, we step up or mid cycle EBITDA margin by doing so.

Let me highlight as well that.

Speaker Change: We provide us a industry, leading 6% total capital return yields in Q3.

Speaker Change: As well.

So of course, we look forward to sharing updates over the coming months as we continue to make progress on all the aspects of our long term strategy.

Operator: We hope that you all will have a great weekend. Stay well and stay safe. Thank you.

Speaker Change: We hope that you all will have a great weekend stay well and stay safe. Thank you.

Speaker Change: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.

Operator: This concludes today's conference and you may disconnect.

Speaker Change:

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Uh huh.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Uh huh.

Speaker Change: [music].

Speaker Change: Okay.

[music].

Speaker Change: Yeah.

Speaker Change: [music].