Q1 2025 LyondellBasell Industries NV Earnings Call
Speaker Change: Hello and welcome to the LyondellBasell teleconference. After a quest of LyondellBasell, this conference is being recorded for instant replay purposes.
Speaker Change: Following today's presentation, we will conduct a question and answer session.
Speaker Change: I would now like to turn the conference over to Mr. David Kinney, Head of Investor Relations. Sir, you may begin.
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 accompanies the call and is available on our website at investors.lyondellbasell.com
David Kinney: Today we will be discussing our first quarter 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.
David Kinney: Nonetheless, the forward-looking statements are subject to significant risk and uncertainty. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements and the presentation slides and our regulatory filings, which are also available on our investor relations website. Thank you very much.
David Kinney: Comments paid on this call will be in regard to our underlying business results using non-GAAP financial measures such as EBITDA and Ernie's per share excluding identified items.
David Kinney: Additional documents on our investor website pride reconciliations of non-GAAP financial measures to GAAP financial measures together with other disclosures, including the earnings release and our business results discussion. Thank you very much.
David Kinney: A recording of this call will be available by telephone beginning at 1 p.m. Eastern Time today, until May 27th by calling 877-660-6853 in the United States, and 201612-7415 outside the United States.
The access code for both numbers is 137-46-205. [inaudible]
David Kinney: Joining today's call will be Peter Vanacker, LyondellBasell's Chief Executive Officer.
Speaker Change: R-C-F-O, Augustine Iscaerto, Kim Foley, our Executive Vice President of Global Olfins and Polly Olfins and Refining, Aaron Ledet, our EVP of Intermediates and Derivatives, and Torkel Rhenman, our EVP of Advanced Polymer Solutions.
Speaker Change: Thank you, Dave and welcome to all of you. We appreciate you joining us today as we discuss our first quarter results.
Speaker Change: These are challenging and volatile times, but I am proud that our team continues to navigate extremely well.
Speaker Change: Let's begin with slide three where we highlight continued leadership in safety performance at L y B.
Speaker Change: Our operational success starts with our core focus on safety.
Speaker Change: I will go to zero commitment is to operate with zero incidents through ownership.
Speaker Change: <unk> and teamwork.
Speaker Change: This is demonstrated by our March year to date total recordable incident rate of zero point 12, improving and all are very low rates from 'twenty to 'twenty three and 2024.
Speaker Change: We see continuous improvements across all aspects of our business.
Speaker Change: But it is particularly meaningful to see this progress in our safety performance, which enables our employees and contractors to return home safely day after day keep.
Speaker Change: Keeping all of our operations reliable and underpinning financial value.
Speaker Change: I am deeply grateful for the commitment and dedication our team has shown.
Speaker Change: On slide four we highlight how we continue to focus on executing our strategy and taking decisive steps, while navigating a prolonged downturn and adapting to elevated market uncertainty.
Speaker Change: Since launching our new strategy and were kept their market is day in March 2023.
Speaker Change: We have been actively reshaping our portfolio.
Speaker Change: In 2023, we closed our Italian polypropylene assets.
Speaker Change: Last year, we sold the E O N D business and we ceased refining operations in February of this year.
Speaker Change: In March we announced the closure of our Dutch P O joint venture with co vessel.
Speaker Change: And we intend to update you on our progress for the remaining five assets in all of our European strategic revenue by the middle of this year.
Speaker Change: So portfolio management activities, we have executed since 2023 have reduced our annual fixed cost expenditures by approximately $300 million net of one time costs tend to reduce ongoing costs, we expect for the Houston refinery site.
Speaker Change: Our value enhancement program or V E. P continues to build momentum and deliver value to the bottom line.
Speaker Change: As it becomes part of our everyday way of doing business at all would be.
Speaker Change: We are on track to unlock $1 billion in recurring annual EBITDA by the end of this year with 50 million of this coming from fixed cost reductions.
Speaker Change: Additional fixed cost reductions or expected following all of our European strategic review.
Speaker Change: The remaining five sites in core fixed costs of approximately $500 million in 2024.
Speaker Change: We managed our capital expenditures wisely throughout this cycle.
Speaker Change: In 2023, we finished the year with Capex investments that were approximately <unk> hundred million dollars below our initial guidance.
Speaker Change: And in 2024, we have reduced our spending by approximately $300 million relative to guidance.
Speaker Change: Our proactive approach to working capital management delivered $200 million of cash in 2024.
Speaker Change: This exemplifies our commitment to responsible cash management and capital deployment.
Speaker Change: We are continuing this momentum while responding to the current market environment with an additional $500 million cash improvement plan.
Speaker Change: That is highly focused on improving cash flows during 2025.
Speaker Change: This is the deepest and longest downturn of my career.
Speaker Change: And why is this likely to be prolonged by volatile trade policies.
Speaker Change: <unk> confidence that we will eventually see a recovery.
Speaker Change: Our plan is to navigate the downturn without compromising our strategy and emerge stronger more resilient and more profitable than before.
Speaker Change: Our 2025 cash improvement plan are C. I P S three initiatives.
Speaker Change: The first is 100 million dollar reduction in capital expenditures.
Alright, Marty I'll take one and flex two growth projects sustaining capex for safety and reliability will remain priorities as we defer some of our smaller growth investments.
Speaker Change: Our second initiative of the CIP is an additional 200 million dollar reduction in our working capital targets for the year.
Speaker Change: In addition to typical levers for managing inventories and payables. One example from our initiative is capturing value from strong markets for precious metals by reducing excess catalyst inventories.
Speaker Change: The third initiative entails at least $200 million in additional fixed cost savings by further streamlining our organization at cross over to manufacturing business and corporate functions.
Speaker Change: These are difficult, but necessary decisions required by these challenging times.
Speaker Change: And as you can see these types of actions are not new to L y b.
Speaker Change: We have been steadily transforming our company over the past two years.
Speaker Change: Our confidence that we are taking appropriate steps to build a stronger and more resilient L y b.
Speaker Change: Needless to say tariff risk is at top of mind of everyone.
Speaker Change: On slide five we give some context on why we believe our robust global supply network served us well during prior trade volatility and is well placed to provide resilience across a range of scenarios.
Speaker Change: Yeah.
Speaker Change: The company's global supply network is mainly positions to serve local demands.
Speaker Change: For our polyethylene and polypropylene polymers, approximately 75% is sold in local markets and not subject to direct impacts from tariffs.
Speaker Change: In the U S. Our domestic market share for P. E is typically 10 percentage points higher than the North American industry.
Speaker Change: Globally less than 10% of our polyolefin sales volumes are likely to see direct impacts from escalating tariffs and counter tariffs involving U S rates.
Speaker Change: And if trade barriers ended up impacting our cost advantaged U S. Exports, we have the ability to shift supply towards cost advantage of production in Saudi Arabia, and then backfill Saudi trade with U S volumes.
Speaker Change: L Y b understands the optionality embedded in our global supply network and.
Speaker Change: And just like in the past our teams have immediately started optimizing trade flows.
Speaker Change: The same principles apply to our propylene oxide business.
Speaker Change: We outline our global supply network on slide 21 of the appendix to the slide deck.
Speaker Change: Of course, the secondary effects of terrorists or more complex can remain a source of uncertainty.
Speaker Change: But even amidst global economic volatility, we remain confidence in a resilient consumer demand for packaged foods healthcare and other essential solutions for everyday life enabled like all of our products.
Speaker Change: Our cost advantaged feedstock positions places at a favorable spots on the global cost curve.
And there were an investment grade balance sheet enables us to remain steadfast in our strategy and continued to execute projects that will surface well when markets inevitably recover.
Speaker Change: On slide six we turn to one of those projects flex to.
Speaker Change: When we reached a final investment decision milestone in the first quarter.
Speaker Change: Our new flex two project aligns with our strategic pillar to grow and upgrade the core.
Speaker Change: The project Leverages our.
Speaker Change: Our cost advantaged feedstock position and proven technology to convert Italy into a higher value propylene at the cost of only a few pennies per pounds.
Speaker Change: This technology has greater reliability.
Speaker Change: Lower capital intensity and lower carbon intensity than competing technologies, such as propane dehydrogenation.
Speaker Change: The project also benefits from the capability to upgrades for carbon or C. Four streams into high value co products and capture synergies with our existing flex units to further boost profitability.
Speaker Change: This new capacity, we're profitably reduce our next long ethylene position in North America.
Speaker Change: Our net short propylene position, which was increased by the exit from refining will also be reduced.
Speaker Change: Flex two will strengthen our market position and reduced <unk> costs for our downstream 40, propylene and propylene oxide businesses.
Speaker Change: We will start construction later this year and expect to begin operations in late 2028.
Speaker Change: The financial return profile for the project is strong with an IRR in the mid teens and an estimated EBITDA benefits of approximately $150 million per year plus startup.
Speaker Change: We plan to spend approximately $800 million in Capex for the project with be expense of about 300 million expected next year.
Speaker Change: On slide seven we outline our awards for a new feedstock allocation in Saudi Arabia that will enable our longer term joint project with Sip Kevin.
Speaker Change: The allocation from the Saudi Arabian Minister of energy provides sufficient ethane and butane feedstocks to support the $1 5 million metric ton ethylene cracker with downstream olefin derivatives.
Speaker Change: Does that what do you project is expected to include the <unk> B property Terry kept that Louis technology for producing specialized Alastair Merrick polyolefin, Houston roofing membranes and other high value applications.
Speaker Change: We currently operate for catalog plants around the world.
Speaker Change: The plant in Ferrara, Italy is shown in the photograph.
Speaker Change: <unk> be in sick and have launched a joint feasibility study for a complex in jubail that could start up as soon as 2031 pending that Friday.
Speaker Change: With that of Ip's, 40% position the value of our process technology and catalyst contributions supported by funding from project based stepped this project with Sip can fits our strategy for disciplined growth.
Speaker Change: Please turn to slide eight as we review the financials for the quarter.
Speaker Change: Earnings were <unk> 33 per share with EBITDA of nearly $600 million.
Speaker Change: Profitability was impacted by the challenging backdrop and has significant turnarounds of our channel view complex cashed.
Speaker Change: Cash returns to shareholders remains robust at approximately $500 million.
Speaker Change: As our ordinary dividends was supplemented by opportunistic share repurchases during the quarter.
Augustine: I will now hand over the call to Augustine to elaborate on our financial progress.
Augustine: Thank you Peter and good morning, everyone. Please turn to slide nine and let me start by discussing our cash generation.
Augustine: Our team converted EBITDA into cash at a rate of 87% over the past 12 months above our long term target of 80%.
Augustine: Over the past quarter, Lyondellbasell used $579 million of cash from operating activities.
Augustine: Our cash flow was impacted by unexpected seasonal build in working capital due to maintenance and improving demand as Peter mentioned, we are targeting an additional $200 million of working capital reductions from our 2025 plan with the cash improvement plan.
Augustine: First quarter cash taxes were higher than normal our CRE came barrel tax relief in 2024. It allows allowed us to defer cash tax payments until February of this year.
Augustine: In the first quarter, we maintained strong shareholder returns with dividends and share repurchases totaling $2 $1 billion over the last 12 months at the end of the first quarter, our cash balance was $1 $9 billion now.
Augustine: Now, let's continue with slide 10, and review the details of our first quarter capital allocation.
Augustine: During the quarter.
Augustine: We returned $433 million to shareholders through dividends and $110 million in share repurchases, while funding $483 million of capital investments.
Augustine: Our team remains focused on being responsible stewards of capital we are growing in a sensible and disciplined way, while working to unlock additional cash from our cash improvement plan.
Speaker Change: I was then Youll CFO I am totally committed to maintaining our investment grade balance sheet, which enables us to execute on our strategy, while delivering meaningful shareholder returns, including growing the dividend.
Speaker Change: Let's now turn to slide 11, and I'll provide a brief overview of our segment results our business portfolio generated $576 million of EBITDA during the first quarter in the olefin and polyolefin Americas segment planned and unplanned maintenance reduced EBITDA by $200 million with additional headwinds from lower integrated.
Speaker Change: Yesterday in margins driven by higher feedstock costs.
Speaker Change: Improved utilization and margins in our olefins <unk> Polyolefin, Europe Asia and International segment and good performance in our API segment provided a partial offset.
Kim: With that I will turn the call over to Kim.
Kim: Thank you all.
Kim: Let's begin the segment discussion on slide 12, with the performance at the olefin and Polyolefin Americas segment during.
Kim: During the first quarter <unk> Americas, EBITDA was $251 million the company's first quarter performance was impacted by planned and unplanned downtime our.
Kim: Our first quarter operating rate was in line with the expectations with our crackers operating at approximately 80%.
Kim: The turnaround at our channel the complex significantly impacted results.
Kim: The downtime on the olefin unit and they reduced co product contributions associated with maintenance on our flex one and <unk> processing units.
We also experienced an unplanned outage at our Lake Charles JV that resulted in several weeks of downtime.
Kim: And during the last quarters call, we discussed the impact of winter storm Enzo in January.
Kim: Higher feedstock costs resulted in additional headwinds for the integrated polyethylene margins.
Kim: North American industry demand for polyolefin had a soft start in 'twenty to 'twenty five with March year to date, polyethylene and polypropylene sales volumes down, 2% and 1% respectable.
Kim: Well domestic P demand has remained solid and growing tariff uncertainty has led to a hesitancy in export markets.
Speaker Change: As Peter mentioned, it's trade policies challenged U S. Polyethylene exports. We are confident our cost advantage will allow U S. P E to find alternative markets.
Speaker Change: <unk> remains well positioned as a top north American producer with a leading product portfolio, a strong domestic market share and robust customer relationships built over decades.
Speaker Change: While feedstock in natural gas costs are currently in kind of.
Speaker Change: The forward curve leads us to remain cautious on costs for the remainder of the year.
Speaker Change: But today retaliatory tariffs on U S ethane shipments to China are serving to reduce exports and benefit U S ethane costs.
Speaker Change: As for <unk>, we expect our operating rates to improve in second quarter.
Speaker Change: As generally remains on track for a successful turnaround and it's starting back up as we speak.
Speaker Change: With this we are targeting 85% utilization across the segment during the second quarter.
Speaker Change: Please turn to slide 13, as you review the results of our olefin and Polyolefin Europe Asia and International segment.
Speaker Change: In the first quarter the segment generated EBITDA of $17 million of which more than $30 million was generated during the month of March in Europe.
Speaker Change: Segment, EBITDA increased significantly as cracker utilization increased to approximately 80% in the first quarter from the 55% in the fourth quarter.
Speaker Change: The increase resulted from the completion of a turnaround at our largest European cracker and improved operational flexibility.
Speaker Change: Packer margins improved due to tailwind from the lower feedstock costs.
Speaker Change: Olefins margins also expanded with higher prices.
Speaker Change: And the European market, we see modest signs of seasonal improvement, but the economic outlook remains uncertain due to the potential impacts will trade volatility.
Speaker Change: We're encouraged by the German stimulus measures and we remain watchful for signs of this translating into meaningful improvement in the end market demand.
Speaker Change: We continue to make progress on our strategic objectives, and the O N P. A R segment.
Speaker Change: Our European strategic review is underway and we should have more to share by the middle of this year regarding the five O N P assets under review.
Speaker Change: With additional seasonal demand improvements balanced by some operating constraints on our assets. We are targeting operating rates of approximately 75% during the second quarter with that I will hand, it over to Aaron.
Aaron: Thank you Kim please turn to slide 14, as we looked at the intermediates and derivatives segment.
Aaron: In the first quarter segment EBITDA was $211 million.
Aaron: Klein of $39 million, primarily driven by margin compression in acetyl and oxy fuels.
Aaron: Actually fuel margins fell due to lower blend premiums and volumes were impacted by some delays in vessel shipments.
Acetyl margins declined on higher cost due to increased natural gas prices.
Aaron: Winter demand for aircraft Deicing fluids drove modest volume improvements with propylene oxide.
Aaron: Last month, we made the difficult decision to permanently close our Dutch P O JV with Quebec stroke.
Aaron: As we grow and upgrade the core we need to ensure each of our assets remain a strategic fit for L. B.
Aaron: We take our obligations to our employees unions and all stakeholders very seriously and we thank them for the constructive dialogue we.
Aaron: We will safely and responsibly shut down the asset and fulfill our obligations to our stakeholders.
Aaron: As we move through the second quarter, we expect improved seasonal demand across most of our IMT businesses.
Aaron: And the start of the summer driving season will likely lead to improvements in oxy fuels margins.
Aaron: We will continue to match our production with market demand and expect to operate our R&D assets at rates of approximately 85% during the second quarter.
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 results for the advanced polymer solutions segment first quarter, EBITDA was $46 million, 30% above the prior year and three times, our underlying fourth quarter profitability.
Speaker Change: Despite challenging end markets. The Aps transformation is delivering results.
Speaker Change: With some help from seasonally stronger demand our team improved profitability and gain market share by focusing on how <unk> can add value for our a P. S customers.
Speaker Change: The team has made substantial progress in building back trust with strategic customers and increasing our win rates to gain new project qualifications.
Speaker Change: At the same time, our transformation is taking a sensible approach to optimizing fixed cost and working capital to increase cash flow from the business.
Speaker Change: Looking ahead underlying demand is likely to remain challenged in our key U S and European automotive end markets tariffs will likely provide additional headwinds. Nonetheless, we expect our transformation will continue to grow a P. S volumes at rates that exceed the growth of our end markets while protecting.
Speaker Change: Margins and improving cash conversion.
Speaker Change: We are on the right track to deliver on our long term goals to profitably transformed the Aps business with that I will return the call to Peter.
Speaker Change: Thank you Darko, Please turn to slide 16, and I will discuss the results for the technology segment on behalf of Jim Stewart.
Speaker Change: First quarter EBITDA of $52 million was lower than the guidance, we provided during our fourth quarter call first quarter licensing profitability declines consistent with our guidance.
Speaker Change: <unk> is selling fewer licenses than last year as the pace of global polyolefin capacity additions mother rates.
Speaker Change: First quarter catalyst volumes improved over fourth quarter results.
Speaker Change: But march shipments were lower than our guidance as some customers delayed orders in response to economic uncertainty.
Speaker Change: We expect our second quarter results for the technology segment will be similar to these first quarter results.
Speaker Change: Now, let me share our views on our key regional and product markets on slide 17.
Speaker Change: As discussed by our business leaders, we expect to see typical seasonal demand improvements into the second quarter across most of our businesses.
Speaker Change: The Americas lower costs for natural gas ethane and other NGL feedstocks are providing tail wins for our second quarter profitability.
Speaker Change: At the same time trade policy productivity is likely to shift trade flows and results in near term trade disruptions as markets adjust.
Speaker Change: Within Europe.
Speaker Change: Margin pressures are expected to ease somewhat supported by lower feedstock costs, while reduced import volumes could contribute to improved pricing power in the region in the meantime industry rationalization continues to tighten supply and demand balances.
Speaker Change: With a recent competitor announcements in capacity rationalizations in Europe are approaching 3 million tons or over 13% of regional capacity.
Speaker Change: Wireless signals of near term market recovery remain muted German stimulus measures are expected to provide a measure of medium term support for the European chemical sector.
Speaker Change: Sentiment in China remains subdued as ongoing trade escalations continue to weight on market confidence.
Speaker Change: We are closely monitoring monitoring both start with developments and the additional stimulus measures that could potentially shift market dynamics.
Speaker Change: In packaging markets, we continue to see steady demands even amidst global economic uncertainty as consumer needs for packaged foods and other essential products support underlying resilience. We continue to have a strong order book.
Speaker Change: And building and construction markets modest demand growth for U S existing homes is likely to be offset by weaker activity in other regions.
Speaker Change: Within automotive markets underlying demand is likely to remain challenged in both U S and Europe.
Speaker Change: Potential for trade disruptions and tariff related volatility or generating headwinds to growth in this sector.
Speaker Change: And then oxy fuels the summer driving season is expected to support improved gasoline crack spreads however, lower crude prices amid ongoing economic uncertainty and weaker oil to gas ratio or likely to limit the extent of margin recovery.
Speaker Change: Our focus remains on strong operations and optimization across our global footprint to capture market opportunities.
Even amidst economic uncertainty this scale of our asset base and the flexibility of our integrated network provides optionality to navigate shifting market dynamics and an ever changing landscape.
Speaker Change: Now, let me summarize our outlook and our progress on our long term strategy on slide 18.
Speaker Change: We continue to grow and upgrade over core through targeted organic growth projects and portfolio management.
Speaker Change: Including our ongoing European strategic review.
Speaker Change: The exits from our refining business. This year was a key milestone in reshaping our portfolio for long term value creation.
Speaker Change: We estimate over portfolio actions, thus far provide approximately $300 million of fixed cost reduction.
Speaker Change: We are pursuing disciplined growth in our circular and low carbon solutions business as we advance on the construction of more it take one of our first commercial scale chemical recycling facility that will strengthen our technology and cost advantage.
Speaker Change: To date, we describes how we are continuing to adapt to broader market economic uncertainty with the launch of our additional $500 million cash improvement plan.
Speaker Change: In combination with more than $1 billion in recurring annual EBITDA, we expect to unlock through our value enhancement program by the end of this year, we are building a stronger more resilient and more profitable L y b.
Speaker Change: And finally, we will continue our focus on disciplined capital allocation and cash flow optimization to maintain our commitment to a strong and growing dividends as a central components of our shareholder returns.
Speaker Change: I am proud to lead this dedicated team as we take decisive actions to create value reshaped payroll upbeat and position our company for sustainable future success now with that we're pleased to take your questions.
Speaker Change: Thank you, Sir ladies and gentlemen at this time, we will begin the question and answer session.
Speaker Change: A reminder, if you have a question. Please press the star followed by the one on your Touchtone phone.
Speaker Change: If you'd like to withdraw your question. Please press the star followed by the time, we do ask you to limit to one question or.
Speaker Change: Our first question comes from the line of Steve Byrne with Bank of America. Please proceed with your question.
Speaker Change: Yes. Thank you I'm interested in your outlook for polyethylene.
Speaker Change: Industry in China from a couple of different perspectives.
Speaker Change: One being with lower crude prices has that enabled your joint venture with board of flip back to profitability.
Speaker Change: Within Peter you indicated that the reduced licensing sales and the key to us.
Speaker Change: <unk> reduced a number of new polyethylene capacity projects, but isn't that quite a few years out as an indicator.
Speaker Change: Revenue in recent years has been up is that consistent with what we have been hearing about seven ethylene crackers under construction in China.
Speaker Change: Is that consistent with your view and how do you think that industry over there is going to to operate in this in this trade war.
Speaker Change: Great. Thank you Steve very good question to start with let me make a couple of comments and then I will hand over to Kim.
Speaker Change: As you know I mean, China demand remains weak.
Speaker Change: And we see that even if there is an increase in investment driven stimulus initiatives. They are not yet focused on supporting direct consumption and spending so we don't see the immediate impact of that.
Speaker Change: You know that the housing market continues to struggle as well with low demands high inventories.
Speaker Change: Yeah.
Speaker Change: If you talk about.
Speaker Change: The investments in additional capacity one needs to always take one step back.
Speaker Change: And see that the P E and probably Italy and trade deficits.
Speaker Change: Is 30% to 35% still in 2025 and most probably also in 2026 and that is even after the new capacity provided that new capacity would come on stream.
Speaker Change: In addition to that you know that.
Speaker Change: T.
Speaker Change: Competitiveness of dose capacities.
Speaker Change: Although these are these capacities are backward integrated.
Speaker Change: And if they are backwards integrated do you have a high dependency also on NAFTA. So that makes it extremely difficult to run those capacities fully flat out that means when I'm looking at supply and demand in China.
Speaker Change: I'm always taking into consideration what is the economic.
Speaker Change: Capacity, so economically feasible capacity and that as you know deviate substantially from a technical nameplate capacity.
Speaker Change: Yeah.
Speaker Change: You alluded to the fact that we.
Speaker Change: We do see and we've mentioned that in previous calls as well.
Speaker Change: We do see that there is a substantially lower demands for additional licensees I can confirm that we continue to see that.
Speaker Change: It's a huge drop.
Speaker Change: In terms of the demand for licenses.
Speaker Change: And that will influence of course D capacity buildup during the next couple of years.
Speaker Change: The latest information that I have also received on the five year plan is that the attention.
Speaker Change: Beijing on the five year plan is not so much anymore on pet Chem capacities.
Speaker Change: But it is moving towards other sectors like for example, artificial intelligence and EV cars.
Speaker Change: So with that maybe Kim if you can talk a bit about bora and local capacity utilization.
Speaker Change: Yeah. A theory you gave a very comprehensive answer, but I'll just make a couple comments, while naphtha prices has half excuse me, while naphtha pricing has come down so has the price of polyethylene in China. So the margins are actually compressed.
Speaker Change: At the moment no as it relates to bore out we do have the opportunity to bring LPG or had the opportunity to bring LPG and does that facility and that has helped us slightly improve our margins versus local competition, but I would say in general that the story in China is consistent.
Speaker Change: You know they they just need more demand recovery and more stimulus of their economy and this is the first quartile at lowest cost capacity the Bora joint venture and it continues to run at technical minimums, So which is about 80% so imagine at what capacity utilization together.
Speaker Change: And first quartile.
Speaker Change: Manufacturing capacities are running.
Speaker Change: Thank you. Our next question comes from the line of Matthew Blair with T. P. H. Please proceed with your question.
Matthew Blair: Great. Thank you and good morning.
Speaker Change: No. Thanks for the commentary on Lyondell tariff exposure regarding your polyolefin sales could you talk about the potential tariff impacts to use feedstocks do you see either U S ethane or propane getting back into the U S.
Matthew Blair: If exports to China are heavily tariff.
Matthew Blair: Well, that's a very good question, Matthew and especially.
Matthew Blair: With the latest news that is circling around.
Matthew Blair: During the last couple of days.
Matthew Blair: So there is.
Matthew Blair: Some rumor, but we have nothing scene in written yet.
Matthew Blair: There is some rumors in China, we heard it also from our customers.
Matthew Blair: That there is a list of about 130 <unk>.
Matthew Blair: <unk>.
Matthew Blair: On that list is ethane and different grades of polyethylene.
Matthew Blair: There eventually would be an exception.
Matthew Blair: On the I think it is under 26% tariff as snow when U S. Ngls.
Matthew Blair: So I said I mean, the trade policies will continue to be highly dynamic over the coming months.
Matthew Blair: So therefore, what we do is we work closely with our customers to find the optimal solutions.
And we've been able to navigate.
Such an environment also in the past.
Matthew Blair: If there is something that is changing here then of course.
Matthew Blair: We will also I am confident about that be able to navigate it.
Matthew Blair: Around it with our low cost manufacturing sites that we have in different regions.
Matthew Blair: Yeah, I'll, just add a little bit of color to based on what we're hearing from the team in Asia.
Matthew Blair: Interesting as Peter mentioned references ethane and different grades of polyethylene, but it doesn't mention lpg's and if you think about it a lot of propane is imported into Asia for their PTH units to produce polypropylene. So it's a very dynamic market and what.
Matthew Blair: What we see in the U S. As a result.
Matthew Blair: The current situation as we see the ethane forward curve low and then bouncing back up into the mid Twenty's a as we get later into the year. So it is very dynamic and then the last comment I would make is if you remember the first round back in 2018.
Matthew Blair: Of how these trade activities progressed, you eventually saw both ethane and LPG on an exception list.
Thank you. Our next question comes from the line of Patrick Cunningham with Citi. Please proceed with your question.
Patrick Cunningham: Hi, good morning.
Speaker Change: Very helpful commentary on the metathesis unit and the return profile looks quite attractive, but it does add some meaningful capex in 2026, but given all the uncertainty oversupply situation and even some peers characterizing it as a lower for longer environment.
Patrick Cunningham: Why is now the right time to proceed and would you consider delaying your negative conditions persist.
Patrick Cunningham: That's a good question of course, and we wanted to highlight that we continue to navigate.
Patrick Cunningham: With our strategy as well so the strategy is the.
Patrick Cunningham: Confirmed even in the current volatile market environments I would actually say that if you look at the third pillar of our strategy stepping up performance and culture. It is that third pillar.
Patrick Cunningham: That.
Patrick Cunningham: Where our value enhancement program is and also know over new cash improvement plan.
Patrick Cunningham: That is actually also triggering an enabling that we continue to invest in growing and upgrading the core and secondly building up a profitable circular and low carbon solutions business. So as a consequence, when we did another round of prioritization and deep prioritization of our.
Patrick Cunningham: Our Capex plans, we came to the conclusion.
Patrick Cunningham: That we continue to invest in our flex two and we continue to progress with our more ethic, one facility in Europe that at over Wessling sites.
The reasons for that is first of all.
Patrick Cunningham: We outlined it I mean on the slides I mean, the flex two is a very attractive investments.
Patrick Cunningham: We mentioned mid teens, so, let's say around 15, 16% IRR.
Mario: Mario take one.
Mario: If you look at the regulatory environments and how that is changing with the latest M. P. P. WR regulation, we are investing in the right region and we see it also from our sales contracts that we have lives are brand owners that we can capture that additional value as we mentioned it's at.
The capital markets day. So it is good because we want to come out of this cycle better as we actually entered into this cycle now.
Mario: So specifically if you ask about the Capex.
Mario: And I gave a couple of numbers in my prepared remarks I mean.
Mario: We navigate that score I mean, that's part of our DNA, we navigated in 2023, we navigated in 2024, we had cash on the bank $3 4 billion in 2024, what we started we had cash on the bank at the end of 'twenty 'twenty four $3 4 billion as we ended the year so same here.
Mario: 2025, we have those competencies, we navigate a cycle we look at what is happening around us very volatile we screen. Our capex. We continue wear to work and capital program and we do in addition than wholesale cost reductions.
Mario: Next we will prioritize on de prioritize and.
Mario: And the premise is that we have from today's perspective is that our capex will not be substantially higher than what youre looking at for this year, what we have announced.
Speaker Change: 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: Peter how do you think about the impact of potential reduced U S polyethylene exports to China on domestic supply and prices.
Yes, David I mean, you know very well good question by the way Yeah, you know very well I mean, our position we highlighted that there's actually also and in the presentation just to make sure that.
Speaker Change: We everybody has that in front of him or her and Thats. The fact is we are not a big exporter in polyethylene.
Speaker Change: Our polyethylene portfolio that we are having.
Speaker Change: In it.
Speaker Change: Specifically here in North America is a differentiated portfolio, but.
Speaker Change: Well we have.
Speaker Change: Very good and intensive relationships with our customers.
Speaker Change: And that has enabled us also to.
Speaker Change: To continue to have very strong domestic volumes in Q1, and we see that Kim alluded to that strong order book for April.
Speaker Change: Actually higher than any prior months that we have seen in 2025, so that his opening remarks and Kim is responsible for the business. So can you just give it to you.
Speaker Change: I would say simply that the trade flows are going to readjust yeah.
Speaker Change: If you look at why these owned assets as well as our JV footprint, we have strong channels to market globally with integrated assets in four key regions, the middle East, China, Europe, and the U S. So what we're saying is we're seeing that trade split shifts so export orders that used to go to China is now going to South East Asia.
Speaker Change: And whoever was previously supporting South East Asia, and maybe the middle East or Korea, they're increasing exports to China as Peter mentioned in his his first answer you always have to remember China imports approximately 30% of their demand.
Speaker Change: But they wanted to re export.
Speaker Change: Two other markets today, it may not be the U S. But it will also be trade flows chefs to other markets. So yeah, and I feel very confident that <unk> has a low cost position our global network and we have this agility to shift to trade flows so.
Speaker Change: I don't see it as a problem.
Speaker Change: I see it as a bump maybe for some but not for us.
Speaker Change: Thank you. Our next question comes from the line of Josh Spector with UBS. Please proceed with your question.
Speaker Change: Yes, hi, its Chris Perrella on for Josh Good morning.
Speaker Change: Just trying to get a handle I guess on the capital spending on a go forward basis with all the large projects can you kind of bucket the capital outlays for 'twenty five 'twenty six on the larger product projects and what the underlying spend is there and how much flexibility do you have to throttle.
Speaker Change: That back if we.
Speaker Change: Go lower for longer in this trough.
Speaker Change: Sure, Chris as I was saying I'm happy to take your call and.
Speaker Change: On your question I think for the Capex, what do you have seen as Peter alluded before we have been very disciplined over the years with mean, reducing now consistently.
Speaker Change: For the past three years, Stephen if you recall.
Speaker Change: The original guidance for this year was going to be around the $2 2 billion, we lowered to $1 nine and we have additional cash improvement plan, we have lowered to one eight out of that we also have said that our maintenance capex is around $1 2 billion.
Speaker Change: Dollars that obviously remains it's a core part of our capital allocation as well to make sure our assets run reliably.
Speaker Change: And then we have had to take very hard decisions on growth projects, and that's where we have prioritized and kept our flex to monarch, one as Peter mentioned on the engineering for more take too I think going forward. You can expect the same level of moderation and attentiveness to how the market evolves and our cash flow situation.
Speaker Change: And would not expect any meaningful increases.
Speaker Change: If the market does not recover.
Speaker Change: Thank you. Our next question comes from the line of Frank Mitsch Fermium Research. Please proceed with your question.
Frank Mitsch: Thank you and good morning.
Frank Mitsch: I also wanted to pass along my appreciation for the the trade flow charts on five and 'twenty one.
Frank Mitsch: Very very helpful. Mike.
Frank Mitsch: My question surrounds a capital preservation mode.
Speaker Change: You know you mentioned that during the first quarter you were opportunistic.
Speaker Change: And buying a $110 million worth of stock obviously the shares are much lower today than they were averaging during the first quarter.
Speaker Change: Was curious as to your thoughts on buybacks during this during this period and.
Speaker Change: Part and parcel of that.
Speaker Change: <unk> quarter I think is when you typically look at hiking the dividend I'm curious as to what management's recommendation I understand that's a board decision, but I'm curious as to what management's recommendation might be on raising the dividend and you know just in general your thoughts around cash returning to shareholders in this environment.
Speaker Change: You know, let me start Frank and I will go gifts to Augustine.
Speaker Change: Okay.
Speaker Change: As you know I mean sure.
Speaker Change: <unk> remain a core part of how we think about cash distributions to shareholders.
Speaker Change: When we talked about are the dividends then and I mentioned it also in my remarks, Ive mentioned it in previous quarters we.
Speaker Change: We have no 14 consecutive years, whereby we have been able to increase our dividends.
Speaker Change: The way, we think about it as management, we have a very solid balance sheets.
Speaker Change: We know how to navigate difficult environments. We've shown it also the last couple of years.
Speaker Change: As I alluded to before.
Speaker Change: So we believe that we are very well positioned to continue to increase our dividends.
Speaker Change: With regards I mean to the buybacks handover to Augustine.
Speaker Change: Sure.
Augustine: If you could take the rest of the question. So buybacks as you correctly mentioned, we've done 110 million in Q1, which has more than offset dilution and we will continue to be opportunistically throughout the year and that's the same sort of consistency capital allocation that we have had the dividend has taken priority on over the years. We've also done share buybacks, where do we see there.
Augustine: Right opportunity on prices or not or are attractive to us relative to our valuation.
Speaker Change: Yeah, Yeah, and Frank I mean, as you can imagine I mean share buybacks is not a program that you're doing that stops on the 31st of March then suddenly yeah and since we are no at the 25th of April.
Les: Hi, Les.
Les: I leave it up to you I mean to imagine if we have stopped I mean buybacks on the 31st of March or if we have continued with.
Les: With the buybacks at that low share price level.
Les: Yeah.
Speaker Change: Thank you. 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 know you're planning to do something with five assets in Europe European EBIT da on an annual basis.
Jeff Zekauskas: Is minimally positive.
Jeff Zekauskas: Those five assets are gone does that really change your European EBITDA and if it does.
Jeff Zekauskas: To what level does it take it and when do you expect to announce what will happen to those facilities.
Jeff Zekauskas: Thank you Jeff So very good question and I was hoping that somebody would ask a question around some of our European assessments.
We continue to make very good progress on the assessments, we've been in the market since a while as you know.
Jeff Zekauskas: We said also that you may expect to hear something and they do not define what that something is that would be premature, but two years something.
Jeff Zekauskas: By the middle of this year from us.
Jeff Zekauskas: The five remaining assets or O N P assets, where we took the decision on <unk> 11.
Speaker Change: <unk> talked about it in his prepared remarks. So now the focus is on those five remaining assets.
Speaker Change: If you look at if we would have a portfolio without those five remaining assets than it would be a highly focused portfolio in Europe N O N P. A.
Speaker Change: That remains.
Speaker Change: We mentioned what the five remaining assets mean, approximately in terms of fixed costs.
Speaker Change: We continue to believe of course that the European market is an attractive markets I set out the beginning regulation continues to progress in terms of circularity and <unk>.
Speaker Change: By the time that regulation will be legally enforced by the countries. We will have over more to take one facility I would say pretty much right on time.
Speaker Change: We will have it up and running.
Speaker Change: So therefore, you see that or the way we look at Europe is much more from a <unk>.
Speaker Change: Circular and low carbon point of view.
Speaker Change: Compared to I mean to just set up that we have today.
Speaker Change: Kim do you want to add something.
Speaker Change: I guess more broadly say as you've said to me many times Peter This is a portfolio upgrade.
Speaker Change: That's our strategy.
Speaker Change: It's a portfolio upgrade so you can imagine Jeff what that means in terms of the.
Speaker Change: The higher EBITDA, we wanted to come out of this cycle stronger than we entered the cycle.
Speaker Change: I remember.
Speaker Change: That I showed.
Speaker Change: In the earnings call that was a third quarter 2024, with all our portfolio measures globally.
Speaker Change: And that includes of quarters European assessment that includes the refinery that includes.
Speaker Change: Over a P O S M.
Speaker Change: Mass flux that includes.
Speaker Change: Italy and oxide and derivatives.
Speaker Change: Mid cycle historic margins for Lyondellbasell were around 18% EBITDA.
Speaker Change: When coming out when we have done that completes transformation.
Speaker Change: The mid cycle margins calculated on the same basis as the 18% would be above 21%.
Speaker Change: Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.
Vincent Andrews: Thank you Peter I'd be curious to hear your thoughts on you know the European stimulus. It seems like Youre enthusiastic so I'd just be curious which of your products. You you would expect to see a direct impact and then if you also think there'll be more of a secondary impact just as the overall economy. There are stimulated and maybe some improvement in.
Vincent Andrews: In consumer, but how are you thinking about it and you know how do you define I think you said medium term benefits whats your thought process there.
Speaker Change: Yeah. Thank you Vincent a lots of things going on in Europe, but let's not forget in an environment, where manufacturing in Europe is not competitive our energy costs are far too high.
Vincent Andrews: There is a regulatory burden and in Europe.
Vincent Andrews: So.
Vincent Andrews: Lined up ourselves together with our peers in the industry, we have been very vocal.
Vincent Andrews: And Antwerp getting.
Vincent Andrews: The top people from the European Commission to answer this year for the second time.
Vincent Andrews: So really asked for supports a because it is important that there continues to be in Europe, a strong chemical industry.
Vincent Andrews: So what we feel and that's maybe the optimism that you hear.
Vincent Andrews: Is that a very early stage.
Vincent Andrews: The politicians and the regulators are listening.
Vincent Andrews: They are open for over arguments.
Vincent Andrews: But let me be clear I mean, a lot of things still need to happen.
Vincent Andrews: Until these stimulus actually is being put into legislation and the member states.
Vincent Andrews: I am much more positive.
Vincent Andrews: When I talk about circularity circular products, so far our surgical and revive our <unk> investments in wrestling because there. Yes, you have a regulation that has been voted it is a P. P. WR regulation plastic plastic waste regulation that creates a market for circular.
Vincent Andrews: <unk>.
Vincent Andrews: With that there is good progress also in terms of an implementation act. The so called S. U P D.
Vincent Andrews: Around mass balancing.
Vincent Andrews: And all these things are progressing well.
Vincent Andrews: Leading them to having to be put in legislation by the member states as I said, we expect that all that will be done and legally enforceable that desk, creating a markets.
Vincent Andrews: In 2026.
Vincent Andrews: When we are starting up over 50000 tonnes meristic facility. So I expect that there were more of a tech facility.
Vincent Andrews: Well as we have set when we did the final investment decision will be rapidly fully loaded.
Vincent Andrews: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Mike Sison with Wells Fargo. Please proceed with your question.
Mike Sison: Hey, good morning.
Mike Sison: So Peter you have talked about improving the portfolio over the last several years and so I just wanted to get a feel for you know sort of what trough EBITDA should be per se I mean in this environment. In 2020, you did $3 9 billion EBITDA, but you did have a minus you know pretty big minus from from refining.
Speaker Change: So I mean should.
Speaker Change: And you know the first quarter run rate suggests a pretty pretty.
Speaker Change: Pretty low trough this time around but any way you can help us frame up what.
Speaker Change: Yeah. The current trough EBITDA should look like and do you still feel mid cycle EBITDA longer term should be significantly better.
Thank you Mike. Thank you for your good question.
Speaker Change: Maybe one remark I'm the way I look at over the first quarter quartile EBITA margin.
Speaker Change: Was slightly for me it was slightly higher than Q4, yeah, almost like under a million.
Speaker Change: And why am I looking at that in such a way because I'm looking at the underlying performance of the business.
Speaker Change: Q1, we had.
Speaker Change: The scheduled break turnaround on S. Kim said this is not just one turnaround in channel view. These were actually three turnarounds and channel view.
Speaker Change: We had this winter storm and so and we had the issues.
Speaker Change: At the <unk> joint venture so.
Speaker Change: All of them had an impact of about $200 million. So if you look at the EBITDA that we published and you're at 200 million than.
Speaker Change: You follow my calculation that may come up of about $100 million higher than in than in Q4 last year.
Speaker Change: The visibility of course, as we have a certain as you have heard I mean from our peers in the chemical industry continues to be.
Speaker Change: A very weak.
Speaker Change: So difficult to have a crystal ball to predict I mean, what is that.
Speaker Change: The low point in the cycle.
Speaker Change: But if you look at previous cycles.
Speaker Change: And.
Speaker Change: Here I includes also what happened during the pandemic 2020.
Speaker Change: First.
You've seen that.
Speaker Change: Packaging has always done quite well in such an environment, which has an influence of course in our polyethylene business.
Speaker Change: You've also seen that.
Speaker Change: When durable goods.
Speaker Change: Or at such a low demands for such a long period of time and here remember. This is the third year that we are at the low point of the cycle.
Speaker Change: No sure I mean over arched by just volatile macroeconomic geopolitical trade environments.
Speaker Change: But there will be a replenishment demand.
Speaker Change: Will.
Speaker Change: Go up again, yeah. The question is at what point in time will demand come up again.
Speaker Change: But keep in mind. This is the longest downturn that I have seen in my career and yes, why do we have the interruption.
Speaker Change: With Citrix environments also.
Speaker Change: That's something we're looking forward in the next what.
Speaker Change: Hopefully two months three months to get more visibility and how it will play out just like with the first time in Trump administration.
Speaker Change: Thank you. Our final question. This morning comes from the line of Kevin Mccarthy with vertical Research partners. Please proceed with your question.
Speaker Change: Good morning, and thank you for squeezing me in Peter I. Appreciate your views on demand for circular plastics and I'm curious as to whether your.
Kevin Mccarthy: Forecast of things like demand growth and price premium levels have evolved at all part of the reason I ask is you know one of your industry peers seems to be signaling that a.
Kevin Mccarthy: Customers are slowing down their pace of investment and slowing down new product introductions, although those comments related to recycled polyesters. So curious as to what you're hearing from Ivan and the team and weather.
Kevin Mccarthy: Whether whether.
Kevin Mccarthy: Whether you're seeing anything that would alter your your pace of investment as it relates to a more tech to for example.
Kevin: Thank you Kevin very good question and thanks for that question as well.
Kevin: Well historically, you've seen the last three years, we grew volumes by about 57%.
Per year last year, it was actually our best 60 percents.
Kevin: We grew also at the first quartile of this year.
Kevin: We had a double digit percentage growth in volumes in our circular and family.
Kevin: And that comes both from the direct sales that we have.
Kevin: And just circling family as well as the channel to markets through a P. S.
Kevin: And you've seen Aps has done quite well and good.
Kevin: Adding more business, despite having a 60% dependency on an automotive business in the automotive business as you know was not good in Q1.
Kevin: Two additional points I mean first of all.
Kevin: Europe very clear with regulation D attention is there yes.
Yes, Brent owners had to reduce their aspiration, but it's simply because they came to the conclusion that the capacity is not there.
Kevin: And it will not be there sufficiently to meet their demands that was a reason why they reduced.
Kevin: Their aspirations.
Kevin: Secondly.
Kevin: And all the discussions that we continue to have an older fields and we are very selective with what Brent owners, we actually.
Kevin: Talking allocates over volumes.
Kevin: We continue to see that there is a high interest there was a high demands there is a high supports.
Kevin: Our investment strategy has also not changed.
Speaker Change: Moura take one.
Speaker Change: We try to have clear commitments prior to taking a final investment decision on a large parts of our capacity.
Speaker Change: The same is our approach for more at take two.
Speaker Change: At this point in time, there's not a huge capex.
Speaker Change: That is being spent on more ethic to it's more around the engineering. The first step that we anyhow had to do was safely shut down the refinery.
Reached fantastic work by the team was executed in a very safe way.
Speaker Change: So no we continue with the engineering on Meristic too and at the same time, we are with our targets at Brent owners in very intensive discussions.
Speaker Change: The asset I don't see that the brand owners in.
In those market segments.
Speaker Change: Core deviating or walking away from the table.
Speaker Change: But lots of work is going on before we are of course at the final investment decision.
Speaker Change: Which would be somewhere in 2026 for motor tick too and we want to see of course commitments from the brand owners before we undertake a final investment decision.
Mr. Berger: Thank you ladies and gentlemen. This concludes our question and answer session I will turn the floor back to Mr. Berger for any final comments.
Mr. Berger: Thank you all I mean for your as usual very thoughtful questions.
Speaker Change: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.
Speaker Change: What did you do.