Q2 2025 LyondellBasell Industries NV Earnings Call
Hello and welcome to the linell Bell. Teleconference, at the request of lined up, sell this conference is being recorded for instant replay purposes.
Following today's presentation, we will conduct a question and answer session.
I would now like to turn the conference over to Mr. David, Kenny, head of investor relations.
Please go ahead, sir.
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 of companies, the call and is available on our website at investors.in Del basel.com.
Today, we will be discussing our second 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.
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 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 ebita and earnings per share. Excluding identified items additional documents on our investor website provide reconciliations of non-gaap financial measures to gaap financial measures together with other disclosures, including the earnings release and our business results discussion
A recording of this call will be available by telephone beginning at 1 PM Eastern Time today until September 1st by calling 877-660-6853 in the United States and +201-161-27415 outside the United States. The access code for both numbers is 13746206.
PVP of advanced polymer Solutions.
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 second quarter results.
Let's begin with slide 3, where we highlight our continued leadership in safety performance at lyb.
Our operational success starts with our core focus on safety.
This is demonstrated by our Junior today. Top decile total recordable incident rate of 0.12 and we're proud of our improving safety records.
Having maintained this track record during 1 of our largest turnarounds at our Channel View complex. Despite significantly higher Staffing levels, underscores our commitment to safety and the Fantastic performance of our team.
Our best safety performance. Enables our employees and contractors to return. Home safely day after day, keep our operations reliable and underpins financial value.
On slide 4, we highlight the strategic criteria to grow and upgrade the core.
Which we outlined at our Capital markets day in March 2023.
You may recall that growing and upgrading our core businesses is 1 of the 3 pillars of our strategy.
To earn a place in our growth. Portfolio assets. Should have leading Market positions, exposure to Growing end markets and offer an attractive rate of return.
We're focusing our portfolio around assets with low cost feed stocks in the United States. And the Middle East, while increasing our access to Circular, and renewable feed stocks in Europe and other regions to support our strategy to grow a profitable circular and low-carbon solutions business.
Over the past 3 years, we have established a track record of shaping our portfolio through Acquisitions divestitures and shutdowns in line with these consistent strategic priorities.
We've been steadily transforming our company. Now, we're confident we are taking the appropriate steps to build a stronger and more resilient LyondellBasell.
On site 5 we give an overview of how we are repositioning our portfolio, to enhance our cost Advantage across, key Global regions through focused Investments that increase our efficiency, while preserving our long-term, competitiveness and optionality.
As shown in the charts on the top right, North America, and the Middle East enjoy structural advantages with access to low cost and GL feed stocks, and energy costs that can serve Global markets, supporting athletic returns throughout the cycle.
And the bottom right chart illustrates that operating rates are expected to remain high and stable in these advantaged regions.
This is why where lyb is growing, its capacity, in a disciplined way.
We expect our capacity share in these regions will continue to increase and exceed 70% as we begin the next decade.
In Europe, High feed stock and energy costs, coupled with insufficient regulatory, support has challenged the Region's Global competitiveness.
Closures amounting to more than 20% of European Italy in capacity have been announced since the beginning of the decade.
Capacity, rationalization will help improve Regional supply and demand balances, but will not change the fundamentals.
Lyb strategy in Europe is to increase our production when recycled and renewable feedstocks to produce profitable and sustainable solutions to serve the local markets.
Recycled and renewable feed stocks sourced. In Europe are expected to be cost advantaged, relative to other regions in the world.
We also expect markets for circular Plastics to be dominated by local drivers rather than Global ones.
We are right sizing our European Hazard base in alignment with our strategy and focusing, our resources on Innovation and growth in Sustainable Solutions that create value.
An example of this is our commercial scale. Morytic 1 chemical recycling plant currently under construction in Germany which uses lb's proprietary Advanced recycling, technology to meet the current and growing demands for circular Plastics.
Over protection on global markets.
With high cost of production. Chinese polyethylene has not been globally competitive and growing capacity. In China has been accompanied by Falling local operating rates.
For closely following the latest actions from the NDRC in China, that potentially could lead to closures of the least competitive assets.
Despite the significant growth in capacity, China has shown over the past several years that China remains a net importer of Poulan from cost Advantage regions.
Our strategy in China is to ensure our access to this important Global markets by maintaining a strong, Technical and Commercial presence with a relatively light asset footprint that includes APS and circular solutions to effectively support our local customers.
These regional trends reinforce our strategy to maintain and grow our presence in cost-advantage regions, optimize our European footprints, and ensure strong market access in Asia.
Turning to slide 6, let's review the commulative cache impact of our actions to conserve and strengthen cash flows into 2026.
During last quarter's call, we introduced our cash Improvement plan which is focused on the delivering near-term enhancements to cash flow.
For 2025, we are targeting approximately $200 million of reductions in working capital driven by the traditional levers of inventory and payables management.
But we also have unique opportunities to improve cash flow such as the monetization of excess pre precious metals inventories made possible by the innovation of a new Catalyst for our vanille, acetate production.
In parallel, our fixed cost reduction initiatives, remain on track to deliver an additional $200 million through organizational. Streamlining
We've also decided to delay activities on selected growth investments until market conditions improve.
For 2025, this will result in an additional 100 million dollar reduction in capex and bring our 2025 capex guidance, down to 1.7 billion dollars.
This reflects a $100 million reduction from our initial guidance for 2025.
We will continue to invest in sustaining capital to ensure our assets run safely and reliably. When the cycle inevitably rebounds.
these actions mean that our cash Improvement plan is on track to achieve a run rate of 600 million in incremental cash flow for 2025, compared to the 500 million. We announced last quarter.
And we're taking further steps to maximize our cash flows into 2026.
We are identifying measures to free up an additional $200 million through working capital and fixed cost reductions by the end of 2026.
In addition we expect that a timely and successful closing of the sale of our European assets will further free up cash.
We're also reducing our 2026 capex by $300 million from 2025 levels down to 1.4 billion dollars largely by differing construction of our Flex 2 projects.
Economics for the Flex 2 project, continue to be. Highly attractive and our strategic rationale remains intact.
We will reassess timing. Once market conditions, inevitably improve preserving this real option for profitable growth.
In total these incremental actions combined with the original cast, Improvement plan or expected to increase Cash Flow by at least 1.1 billion dollars during 2025 and 2026.
To further protect our resilient balance sheet.
Navigate a cycle and preserve maximum Financial flexibility.
Our liquidity position remains strong and our depth maturity profile is very favorable.
Please turn to slide 7 as we review the financials for the quarter.
Earnings were 62 cents per share with evida of 715 million.
With less downtime and lower feed stock costs.
As expected, cash generation resumed this quarter.
Cash returns to shareholders remain robust at more than $500 million. As we increase our ordinary dividends and continue our opportunistic share repurchases.
I will now hand over the call to Augustine to elaborate on our Capital allocation strategy and financial programs.
Thank you, Peter and good morning everyone on slide. 8, we start with a longer term view of our capex.
We continually assess our capital allocation strategy as we navigate the ups and downs of the petrochemical cycle. This is not an activity we started this year. These assessments are part of our continual efforts to optimize our business.
As you can see from the chart, we have reduced our cumulative capex budget by approximately $2.4 billion relative to the plans we described at Capital Markets Day in March of 2023, supporting cash shareholder returns.
Our first priority for capital investment is to always maintain safe and reliable operations across our existing asset base.
This commitment ensures. We maintain flexibility and Readiness to capture the commercial opportunities when market conditions, improve
Following the planned sale of our European assets in 2026, we expect to invest approximately $1.1 billion per year on sustaining capital for our asset base.
In addition investment in our more Tech 1, chemical recycling asset in Cologne, Germany continues as planned construction is going well, and we look forward to operating this Innovative technology at scale and contributing to our profitability.
Outside of these two key priorities, we are making significant adjustments to our CapEx profile.
Following board approval in November last year, we remain confident that Flex 2 is an attractive project that helps address our monomer balances while generating strong returns. However, having finalized front engine engine engineering and design but not yet started construction, we have made the decision to defer this project until market conditions, improve
We have also decided to defer a final investment decision on more Tech 2. This project would be a second commercial-scale chemical recycling plant using our proprietary MORE technology, to be built on the site where we previously operated the Houston refinery.
We continue to believe that the combination of our proprietary technology and our existing infrastructure will provide LyondellBasell with a material competitive advantage as we establish ourselves as a profitable leader in the circular economy.
But given the uncertainty in the timing of the market recovery, we will postpone this investment decision until market conditions improve. This delay allows our teams the necessary time to ensure that offtake commitments from Brand owners are in place prior to a final investment decision.
Updates to our Capital plan. And other modeling information are described in the appendix to this slide deck.
Now, let's continue with slide 9 and examine a broader overview of our capital allocation in the second quarter.
We are navigating this prolonged cyclical downturn, while continuing to advance our strategic initiatives to build a stronger and more resilient lyb.
As Peter mentioned, we made significant progress on our portfolio Management in Europe. The value enhancement program remains on track and our cash Improvement plan is On Target to add, 600 million dollars of cash flow to fund our progress.
During the quarter, positive, cash from operations, Health, fund, Capital, Investments, and share BuyBacks. As we continue to repurchase our shares at attractive prices.
We are taking clear actions to ensure that we can continue to navigate the cycle successfully with that commitment to our investment. Grade credit rating as the foundation of our discipline Capital, allocation framework.
Please turn to slide 10 as we outline our cash generation.
Our team converted EVINE to cash at a rate of 75% over the past 12 months, close to our long-term target of 80%, while our average since 2020 remains well above our through-cycle target.
In the second quarter, we maintain strong shareholder returns with dividends and share repurchases totaling 2.1 billion dollars over the last 12 months.
At the end of the second quarter, our cash balance was 1.7 billion dollars. This is higher than our Target cash balance of 1.5 billion and we have sufficient Financial flexibility to navigate lower levels if necessary.
Now, let's turn to slide 11 and I'll provide a brief overview of our segment results.
Our immediate son derivative segments.
Profitability in Olive and polyenes Americas improved with less downtime, following the successful completion of several turnarounds at our Channel View complex in the second quarter.
With that, I will turn the call over to Kim.
Thank you, Augustine. Let's begin the segment discussions on slide 12 with the performance of Olin and Poly, Olin's America. Segment second quarter on P. America's EBITDA was $318 million, a more than 25% improvement relative to the first quarter.
Largely due to the higher integrated polyethylene margins, following less downtime.
Planned maintenance continued in the second quarter as we completed safe and successful turnarounds at our Channel View complex on time and on budget in April.
Our second quarter, operating rate was in line with guidance at 85% with our crackers running at approximately 90%.
During the second quarter, the North American polyolefins industry experienced volatility as markets adapted to an evolving tariff landscape.
Tariff announcements pressured export volumes and drove a decrease in April polyethylene contract prices.
In May hired, domestic demand, declining inventories and improving, export volumes generated, positive momentum. Resulting in a successful price increase during June.
Second quarter domestic sales for the US and Canada. Polyethylene industry rebounded to the highest volumes since the second quarter of 2022.
Effectively bridging this prolonged downturn.
And despite rising production, producers' inventories for the North American PE industry declined by 3 days of sales during the second quarter.
In the near term, we expect continued steady demand in a June price increase to provide tailwind for the integrated polyethylene margins during the third quarter.
Our operating rates are expected to remain strong with higher crack or operating rates following our Channel View, turnaround, and we are targeting 85% utilization across the segments during the third quarter.
Please turn to slide 13 as we review the results of our olifins and polyolefins segments: olifins in Europe, Asia, and the international segment.
During the second quarter, the segment generated EBITDA of $46 million.
Segment evidence improved as lower Naphtha and LPG feedstock costs drove margin improvements, and rising seasonal demand provided pricing support.
We continue to make progress on our strategic objectives, and we're pleased to announce the proposed sale of our 4 European MP assets in June. This significant milestone is another example of our progress over the past 3 years to optimize our portfolio as we grow and upgrade the core.
In the early weeks of the third quarter, our order books, reflect steady, summer demand, for elephants and poly olifants.
Nevertheless, we remain watchful for the potential effects of volatile trade policies.
We are targeting operating rates at approximately 75% during the third quarter.
With that, I will turn it over to Aaron.
Thank you, Kim. Please. Turn to slide 14. As we look at the intermediates and derivatives segment.
In the second quarter segment ebita was 290 million. An increase of 79 million, primarily driven by improved margins for styrene and propane oxide.
Starring margins benefited from lower Benzene feed stock costs as well as short-term Supply disruptions across the industry.
In contrast oxyfuel margins remain near winter lows as low crude prices. Weak gasoline, crack spreads and trade volatility limited typical summertime seasonal improvements.
As we move through the third quarter planned industry, outages and oxy, fuels could provide some margin Improvement.
Although margins are likely to remain low compared to normal summertime levels.
Starring margins, are likely to decline as industry operating rates return to typical levels following unplanned downtime.
In September, we will begin a plan turnaround of our Laporte acetals assets.
The turnaround includes initiatives to begin converting our vinyl acetate monomer or van production to an Innovative lyb Catalyst that improves margins and reduces our utilization of costly precious metals.
Sales of precious metal inventories have contributed at least $50 million towards our cash improvement plan during 2025.
As we continue to match our production with market demand and start our maintenance plan, we expect to operate our IND assets at a weighted average rate of approximately 80% during the third quarter.
Thank you, Aaron. Please turn to slide 15 as we review results for the advanced polymer solution segment.
$40 million, similar to the improved profitability levels we delivered in the first quarter, despite ongoing challenges in automotive markets.
Automotive production volumes remain sluggish and our volume slightly declined due to lower demand from construction and electronics looking ahead. We expect demand in our key regions and sectors to remain soft.
Auto production is expected to decline due to typical third-quarter downtime.
However, we expect our cost-saving measures will improve cash generation during the third quarter.
Despite the challenging market backdrop, we remained steadfast in transforming our APS business. We have already made strong progress in increasing win rates with customers and gaining new project qualifications.
Additionally, we are focusing on cost reductions to improve the resilience of the business.
We are on the right track to deliver on our long-term goals to profitably transform the APS business. With that, I'll return the call to Peter.
Thank you. Please turn to slide 16, and I will discuss the results for the technology segment on behalf of Jim Stewart.
In the second quarter, EBITDA of $34 million was lower than the guidance we provided during our first quarter call. Catalyst volumes improved, but margins declined due to inventory cost adjustments and changes in sales mix.
Second quarter licensing, profitability remained flat as poly. Olofin licensing activity, across the industry remained subdued showing a substantially lower buildup of new petrochemical capacities,
We expect third quarter results. For the technology. Segments will be similar to the second quarter results as margins. Improve on Catalyst sales, mix offset by the low activity in licensing markets.
Now let me share our views on our key regional and product markets on slide 17.
As we enter the third quarter, we expect global trade flows will continue to adapt to a dynamic Tara tariff and trade policy landscape. We're hopeful that the trade environment will stabilize and enable higher consumer confidence and trade flows.
In the Americas, solid domestic and export demand is expected to drive improved pricing. Notably, polyethylene prices rose in June, reflecting a strengthening market environment and providing tailwinds for third-quarter profitability.
In the second quarter, U.S. and Canada domestic sales volumes for the portal industry were the highest since the beginning of this downturn in the second quarter of 2022.
The producer inventories are falling as we enter the peak months of the U.S. hurricane season.
Within Europe, favorable costs for NAFTA and other feedstocks, coupled with steady summertime seasonal demands, are supporting modest improvements in integrated polyline margins. Additionally, capacity rationalizations across the region continue to improve supply and demand balances across the industry.
In Asia, near-term capacity additions are still pressuring regional supply and demand. That said, we're cautiously optimistic on China's stimulus programs and, longer term, rationalization efforts, which could provide support in future quarters.
In packaging, markets, global demand remains steady even amid broader economic uncertainty, as consumer needs for packaged foods.
And other essential products support underlying resilience.
However, in building and construction markets, demand remains constrained, with new housing starts and existing home sales showing continued weakness.
Within automotive markets, we continue to monitor the impact of tariff volatility, which is contributing to ongoing uncertainty.
Late summer, downtime across the industry, typically pressures, third, quarter production volumes.
Finally, anoxy fuels this Summer's driving season has not generated. Expected margin improvements. Margins are expected to remain low for the remainder of the Season. Summer season, due to low, crude prices and weak gasoline, crack spreads.
Our disciplined approach to optimizing operations across our global network ensures we are well positioned to capitalize on market dynamics.
The risks and opportunities they present to our business.
Now, as we turn to slide 18, let me summarize how we continue to navigate the cycle while executing on our long-term strategy.
As we move through the cycle.
We are focused on execution and staying disciplined in how we operate.
Last quarter, we introduced our Cash Improvement Plan, and we are now on track to deliver $600 million in 2025, above our original target of $500 million.
We are achieving this by optimizing our organizational structure, improving working capital efficiency, and reducing capex.
This disciplined approach extends to the actions. We are taking into 2026.
As we make purposeful decisions to preserve cash and protect our balance sheet. While supporting shareholder returns,
As I previously mentioned, we have made the decision to delay. Building our Flex 2 project to reduce near-term, Capital outlays, while preserving real options for future growth.
At the same time, we continue to prioritize sustaining capital and reliability investments.
These are non-negotiable and ensure the stability of our operations and safety of our people.
We've also taken strategic actions across our portfolio to strengthen long-term profitability. We continue to remain on track to meet our 2025 targets. In addition, the planned sale of our four European assets will reduce recurring capex and other costs in the region.
We are rebalancing our global footprints toward more cost-advantage regions while aligning our growth investments with market realities.
Together, these steps reflect our discipline as we navigate the cycle.
I am proud to lead this dedicated team as we continue taking strategic actions to create value reshape lyb and position, our company for sustainable future success.
Now, with that, we're pleased to take your questions.
Thank you, ladies and gentlemen. At this time, we'll begin the question-and-answer session. As a reminder, if you have a question, please press the star followed by the 1 on your touchtone phone. If you'd like to withdraw your question, please press the star followed by the 2. We do ask you to limit yourself to 1 question.
Our first question comes from the line of Patrick Cummingham with City. Please proceed with your question.
Hi, good morning, and thanks for taking my question. Yeah, so the first half in the Americas was affected by, you know, planned and unplanned downtime, some price declines in polyethylene, and given the operating leverage and price increases, you know, lower fees—not costs running through. You know, what sort of sequential lift should we be triangulating based on current visibility? And just anything in your view supporting additional price increases, you know, that are out in the market.
Thanks Patrick. Very good question to start, uh, the Q&A session with, um, as you're rightfully said, and we said it in a prepared remarks as well. And on P, America's, we will have less downtime because we have the schedule turn around and channel view. That was extremely well executed. Actually, there were 3 turnarounds
Uh, which had an impact of 85 million dollars. So you may expect that 85 million dollars and improvements to see in Q3
Uh we mentioned also the operating rates um that we're planning for North America which is 85% so we continue to navigate in a prudent way. Uh, in the markets, we expect improved all of them's margins. Also that are benefiting from higher co-product contributions.
On the pricing level, I will hand over to Kim.
Thank you Peter and thanks for the question. Um, let me start by historically, this industry does not see back-to-back price increases, unless there's a major Supply disruption. So think of like a winter storm or hurricane that being said, there are a lot of positive indicators in the market. Today, you've seen export demand improved significantly over the last 2 months as some trade and tariff uncertainty has been resolved or paused.
Domestic demand is up year-on-year, quarter-on-quarter, and month-on-month. Hence, the support for the June increase.
you see GDP numbers that are higher than we thought in China and in the US that there may be some noise in the US number
The next few weeks, there's absolutely potential for price increase in the third quarter.
Thank you. Our next question comes from the line of Frank Mitch with fermium research. Please proceed with your question.
Hey, good morning. Um, you know, it's becoming fashionable, uh, in the chemical industry given this extended downturn to, uh, for companies to cut their dividends, um, obviously saw that you had raised your dividend not that long ago and then you were, you were doing some BuyBacks. I'm curious given that, you know, you're not really earning in terms of operating cash flow, you know, the uh, the shareholder.
Returns in the form of dividends and buybacks. Uh, if you could expand upon your thoughts on, uh, the dividends, uh, and the safety of it, at lined up to sell.
All right, Frank. Uh hope you're doing well. Thank you for your question. A good 1. Of course. Uh, let me just be clear. I mean first of all I mean that we will pay out our Q3 dividend of 1.37 per share. And that is of course consistent uh, with Q2 and that payout will be on September the 2nd
Now, to your general question, um, with a sharp focus on cash conversion and disciplined investments.
We were able to start, as you remember, 2025, with very high levels of cash on hand. I still remember, a couple of years ago, that people actually challenged us on why we had such a high level of cash on hand. Um, it's a good thing to have in today's environment. So we started with $3.4 billion, which is the same amount we held at the beginning of 2024.
Now, we continue to target a minimum cash balance of $1.4 billion, but we can and we have managed that lower balance through the cycle. Our total liquidity, as we outlined, remains strong at $6.35 billion.
And the foundation of our Capital, allocation strategy has also not changed. And that is our investment grade rating.
so,
Uh, in that context, we continue to recognize the importance of the dividends as a significant component of our returns to shareholders and our actions continue to focus on securing our dividends while maintaining the prophet the benefits of our investment grade rating.
We're also not planning any further share buybacks over 2025 and 2026. We did some, as you know, in Q1 and we did some in Q2.
And our cash improvement plan is on track to improve our cash flow over the years 2025 and 2026, as said, by at least $1.1 billion.
In addition to that, I mean we believe the cycle will eventually rebound.
I've mentioned that in earlier calls as well. Uh, this is the longest on turn in my Q3.
And with our strategic and intentional portfolio management, as well as our proactive cash management.
We remain confident that we will navigate this cycle and merge even stronger as a more sustainable and a more profitable leader for our industry.
Thank you. Our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.
Uh, thank you uh, good morning. Um, could you just quickly clarify whether the 2026 capex forecast of of 1.4 billion, does that include the potential benefit of the 110 million dollar $100 million euro reduction that you would get if the European asset sale closes? And then my actual question is, if you could talk a little bit about the pressures Metals opportunity and and indeed, it seemed like it was a benefit of maybe 35 million in the quarter. And some of the comments on this, call seem to suggest that the the new Vamp technology would allow, um, you know, some some type of benefit to continue. So, if you could just talk about what that, you know, continuation benefit would be, uh, and potentially,
The size and I appreciate it.
Thank you, Vincent, good questions. Uh, the first 1, I'm going to give to Augustine.
Sure, Peter. Um, thank you Vincent for the question you have to clarify the 1.4 billion capex for 2026. This is with our existing base as you uh, properly mentioned. The 110 million that is associated with the European asset. We will see that um, happening or that reduction further once that transaction closes and going forward.
8. So you won't see that, um, materially impact Us in 2026.
And and yes just to clarify, it was 35 million of of precious, metal sales in the second quarter.
Thank you. Our next question comes from Lime of Jeff Zakas, with JP Morgan. Please proceed with your question.
Uh, thanks very much.
You saw your cash flow from operations. For the first 6 months, there was a deficit of a little less than $20.03 million.
And last year, in the first half, I think you generated $1.2 billion in cash flow from operations.
now, I understand that you wish to improve your cash flow generation but can can you comment on
the general level of cash flow generation that you expect for um,
2025, I don't know. Assuming $3 billion in EBITDA or a little bit less than that.
and,
And, you know, can you can you talk about the factors that are, um, pushing down your cash flow generation, whether it's the refinery or its accounts payable or you know, whatever it is.
Um, and then, um, how's the price increase in polyethylene for July looking.
Okay, great. I mean good questions, of course. Uh, Jeff. Thanks for the question. I mean I hand over immediately to Augustine on the first question and then Kim can also further elaborate. I mean, uh, are ready to the previous question that she answered on, uh, for the utility in North American prices.
Sure, thank you, uh, and Jeff happy to take your questions. So I think that the main difference, as you correctly point out in the first half of, uh, 2024, our cash flow from operations was much stronger. Now, if you recall what happened in here in the first quarter of 2025, when our cash flow from operation was negative, this was a couple factors 1. There was a big uh, working capital build, but we also had the effect of having the additional tax payments from Hurricane and Barrel and that's mainly what um brought us down to that 579. Now for second quarter, our cash flow from operations is positive at 3:59. So that's uh swinging of 930 million and our working capital. This was also a release of 117. Um, so we're trending in the right direction and I would also uh, further point that
Our cash generation and cash conversion is usually much stronger in the second half of the year. So we are expecting, if you recall last year, the second half had a cash generation or cash conversion of 167%, and just in Q4 alone, more than 280%. So we are on target for strong cash conversion as well in the second half of the year. We expect positive cash flow from operations also in the second half of the year, and we are still on target to have our 80% cash conversion for the full year. So, you know, we will continue to be very disciplined on working capital, as you have heard before from the cash improvement plan, not only this year but the next. And then you should also see the positive effects of the fixed cost reduction, both the run rate this year and what we will accomplish in 2026.
I think, is it related?
To the price, I'll just reiterate historically the industry hasn't seen back-to-back price increases unless there's been a major Supply disruption.
Thank you. Our next question comes from the line of Michael Sisson with Wells Fargo. Please proceed with your question.
Hey, good morning guys. Um, I I guess when you, when you put the put and takes, you know, you do got you do have some pricing momentum polyethylene, at least in June uh might get some in July oxy. Feel seems a little bit, challenged sequentially, you know, the these Inc earnings could be up or down or just you know, general direction, given everything that you see now and then longer term.
You know, I guess you know mid-cycle potential for EBITDA. Has it changed? Is it just simply delayed? Probably delayed.
Given what the, the, the, the, the, the, the difficult, the trough here, but just your general thoughts, there longer term, what line does earnings potential can get back to over time.
Workers from less downtime. And that is following the completion, the successful completion of the channel view turnarounds.
We also started at Q3 in onp Americas with improved political and chain, Mark margins. Remember the successful price increase uh that was implemented.
And also, you may expect to see already the results out of our cash improvement plan, uh, in fixed cost reductions that not just, of course, in ONP, uh, but across, I mean, the portfolio.
If I, um, switch and then, you know, and P America is what we continue to see, is we see a resilient packaging business. We see strong export demand. What we also start seeing, actually, is something that you saw in the pandemic as well, is that consumer behavior is changing. So people are going less out for dinner or lunch in restaurants, but there is more consumption at home, which automatically also supports, uh, packaging business, packaging demands.
If I shift gears, I mean, to the European region. Also here, I mean improved polymer chain results, favorable NAFTA prices. Um, still, I mean a favorable exchange rates.
We also will have an addition to that the operating rates, uh, increased, uh, because in in Q2 we had in wessling, I mean, the large cracker over 6. Uh, we had an outage there, we had some operational constraints, uh, at that facility.
Uh, so we believe that is now behind us.
In the IND business. Um, yeah. We don't expect just like Aaron said and the prepared remarks.
Uh, we don't expect, I mean, that margins would improve. If you look at where low crude is currently and where cracks are.
Operating rates, I mean 80%, which is a bit lower. But that is mainly related to a scheduled turnaround that we have um, in in LaPorte.
And then on the other side we also alluded to the fact that um APS business and the technology business uh Q3 over Q2 should be pretty much flat.
Thank you. Our next question comes from the line of Kevin McCarthy with Vertical Research Partners. Please proceed with your question.
Yes, thank you and good morning. Um, maybe for Aaron, can can you talk through uh, the third quarter dynamics, that you see in the intermediates and derivatives segment? You, you had a nice earnings improvements sequentially in the second quarter. But as I listened to your commentary, you know, around MTB and styrene, uh, siren, it does sound a little bit more cautious margin wise.
And uh, you do have the turnaround, so maybe, uh, frame that out. Uh, do do you expect a, a step down sequentially. And, and how would you put that into the context of, um, your view of the cycle shape for the segment?
Yeah, thank you. Kevin. I appreciate the question. I guess I'd go back to the first quarter to second quarter increase that you're referring to, and your your question and really that included. Uh, some 1-time costs associated with our exit of the p 11 asset. Uh, the JB that we have with covestro in q1. So that was 1 of the reasons for the big step up in the second quarter. Um, I would say as I look ahead to the third quarter, I don't see any material improvements over, really, any of our businesses, if you look at the p and and derivative chain, uh, most of our customers specifically in the poly, all segments are quoting, uh, year-over-year, declines of at least 10% at this point. Uh, if I look at our acetals business, you refer to our turnaround, which begins really in the middle of September, so it will include both third quarter and fourth quarter impacts. Uh, however, I do expect the channel view methanol unit which was down for the majority of the second quarter, uh, for
Planned outages to be back up and running so that should help offset some of that impact that we're going to see, uh, with the turnaround in Laporte. Uh, and then with Oxi fuels, no different than most pet cams. It's, it's an oversupplied market right now specifically in the US Gulf Coast. Um, some of that is related to our own capacity. We're we're now running our PBA unit at above Benchmark rates. Uh, and with additional, uh, volume coming out of China to the West Coast of Latin America that is displacing some of the US Gulf Coast volume. That is that is having to be cleared into other markets. So, if I look from the second quarter to the third quarter, again, relatively flat
Yeah, relatively flat, and that means your expectations in oxy fuel margins are relatively flat. I mean, correct your Q3 compared to Q2.
Comes from the line of John Roberts with mu security, please proceed with your question.
Thank you. You mentioned China's new program to help improve their chemical industry. You've got a number of joint ventures their full polyethylene and uh hopefully not outside. You expect any of your JVS are going to get merged with other companies or
some other restructuring.
Thank you, John, for your question. And, um, you're probably also here talking about what is being called today the China anti-involution measures.
Uh, yeah, of course. I mean we've noticed that the NDRC, uh, I mentioned it in the prepared remarks, is asking for detailed information on older chemical assets.
And that, of course, includes also pet cam, still a large, relatively large number of non-integrated, non-flexible older, and smaller crackers in China.
We expect that it will take some time to get more visibility and real actions taken something. We've
Also witnessed in several chemical sectors in China in the past.
Uh, but we do expect that it will lead to real actions.
Since, uh, the majority of FedCam assets, uh, are losing cash, uh, in China,
Uh, of course I mean, and as you can see from our actions, um, we don't speculate on what is going to happen. I mean, in China, we focus on what we can control.
Um, that means that, for example, our Bora asset is running at minimum technical rates, um, as we speak.
Thank you. Our next question comes from the line of David beg lighter with de Bank. Please proceed with your question.
Thank you, Peter on, I'm more Tech to and the decision to delay FID was that due solely to the market dynamics or was there an element of trying to conserve cash as well?
And secondly, what does this do to your targets in your circular strategy here in terms of realizing those numbers you put out there? Thank you.
Thank you, David for your question. Um, remember. I mean more Tech 1 continuous uh to move ahead. Uh so contraction is in construction is proceeding well that is the unit that we're building uh in our um site in wessling.
Uh, we also see that regulation in Europe, uh, with the PPW as well as the current, um, discussions around the SOPD mass balancing, is moving, uh, in the right direction, creating an attractive market, that capacity in Europe. Uh, in Wessling, Moretech 1, uh, is 50,000 tons.
More Attack 2. Just a reminder, everybody is,
Plan to be built uh, in our site, the refiner site, uh, in Houston, and that would have a capacity of 100,000 tons.
So we will complete the front-end engineering and design of the more tech 2 projects by the end of this year.
Uh, we continue to be excited about the project's potential.
We're also continuing to collaborate with brand owners to understand their needs in North America and ensure that we have their commitment before moving forward with a final investment decision.
Uh, but we have adopted adapted our development plans, uh, to the pace of development in the markets, uh, and especially also The Prudent allocation of capital, We Believe completing front-end engineering and design, uh, and stopping the projects, um, taking a hold after that phase. Uh, we can then relatively quickly activated. Again, if on 1 hand side, we see that it fits
With our capital allocation plans. And then, on the other hand, we see that commitment is coming, uh, firm commitments from brand owners.
Thank you. Our next question comes from the line of Alexa. Yes, we’re off with KeyBanc Capital Markets. Please proceed with your question.
Thanks. Good morning. I just wanted to follow up.
By olisis market. Uh can you just describe the current state of it? Uh, how have margins changed uh, sort of in the middle of this, uh, most trustful environment and uh, any expectations on how you know pyrolysis is basic economics for recycling, could change over the next 12 to 18 months.
Fly. There has been a lot of delays, I mean, in startup companies, some startup companies actually went belly up as well. Um, and therefore we continue to believe that this will be a growth markets, I alluded already, I mean to the regulation environment regulatory environment in in Europe we see positive momentum. Also in the regulatory environments uh, in the United States, which is mainly on a state level.
um, so
Has uh we have said in the past I mean this is a a business that we continue to believe in uh that will um have price setting based upon value based pricing uh, and not so much applying human simply because Supply is uh going to lack. I mean demand for quite a long period of time.
Thank you.
On the line of Matthew, do with Bank of America, please proceed with your question.
Good morning, and uh, thank you for taking my question. I actually kind of have two if you'll allow me. So, uh, you ran on P America’s at like 90% rates in the second quarter, but are targeting 85 in Q3. At the same time, you're expecting better rates in the third quarter. So, can you just flesh this out and, and why you'd be running rates like below what looks like 90% for the industry, at least at the end of June? And then,
In technology, EBITDA declined $19 million quarter over quarter, year over year, despite what looked like higher volumes. Is that just margins being down, or is there a mix shift? And then, why would Catalyst margins be down, if that's the case?
Give me the first question. I'm income on uh utilization rates. Absolutely. And this is 1 of the things that's always gets confusing. A little bit in opan so the 90% operating rate that you're referring to is the crackers.
Okay, the 85 is the segment. So you have to think crackers, olins, polyethylene, and then polypropylene.
So, what we're saying is we're going to run the third quarter higher on lines.
And maybe lower polypropylene. So that's why you see the average, the same. But we think we'll have higher earnings. The other thing I would say on olan's earnings and Peter alluded to it earlier.
You know, you've got new derivative capacity in North America that just came online. You've got ethylene exports that have been re-established, and you have high polyethylene demand. So you're seeing ethylene prices already start to increase early in the quarter, and we're just beginning hurricane season. I think a lot of the upside could also be on the Olin side in the third quarter.
On the technology question. Um,
I mean, first of all, uh, if you look at the technology business units,
Something that we have, uh, forecasted, uh, already last year is that I would call it.
Dramatically lower demand. I mean, for licenses.
So you see across the world, uh, there are hardly any demand. I mean, for licenses, which is normal, because if you see, how much has been built and is in process of being built, especially I mean in China, uh, then it's logical, uh, that there is a correction, that is no coming. Now on the Catalyst site, um, there was an impact that we had, um, on an inventory uh, correction as well as, as, as a fixed cost. Uh sorry. Um, an exchange rate um, correction that influenced them in the results that we had in uh in Q2 so you're not
We're not expecting to see that, um, for the future.
um, it's approximately, if you ask, I mean, how much I mean I would say it's a, it's a low double, um, million eida, um, impact in Q2
Thank you. Our next question comes from the line of Josh Spectre with UBS, please. Proceed with your question.
Yeah. Hi, good morning. Um, I was wondering if you could talk a little bit about or share your thoughts around, I guess, some of the European frameworks that have been coming out. There’s maybe some recycling of some older frameworks but around energy support, reducing regulatory burden, and you know, other things to protect the industry. Do you see any of that as meaningful for the industry? And just given the shift in your portfolio, is any of that meaningful for Lyondell at this point? Thank you.
Thank you Josh. Uh good question on Europe. I mean on 1 hand side, I mean, what we do see um in terms of a circular markets uh, being built up
Regulation, uh, that has already been put in place.
Uh, and the implementation act. I mean, on the mass balancing, we know when it's in its final steps. Um, to then, uh, be, um,
Finally agreed upon.
Uh, and as such, not just, uh, the PPW are creating those markets.
Uh, with high percentages of recycled material.
Uh, but then you also have clarity on what kind of regulation will be there. What is accounted for on the mass balancing side?
So there I see clear actions, I see, um, quite a lot of progress. Um, and there is documentation, which is then in about what 16 months from now is going to be legally uh, enforceable in the member states.
We've seen more attention also coming on the general support. I mean, for the chemical industry from the European Commission.
Um, we see that as a positive sign.
Um, but um, the devil is in the details. So we're going to have to see that being articulated in much more detail.
Um, with uh, respective regulation with respective support. I mean for energy costs and so on, so it does not change um our strategy and view that we have on Europe.
Uh, so it does not change. Um, our view and pushing forwards on closing the sale of the 4 respectively.
Thank you. Our next question comes from the line.
Morning, Peter. Um, you know, I completely understand, you know, it's a tough macro right now. You know the focus for you guys, and much of the industry, is conserving cash. But, you know, over the last couple of years, you guys, um, you know, embarked on sort of acquiring smaller recycling companies. So, you know, with valuations having come down, AC the board, um, are there more of those things that you could potentially look at in the near to medium term? And generally speaking, what is your thought process today about expanding further in that arena?
Thank you, Hassan. I'm actually your question, um, allows me then eventually to, uh, actually present a bit of a bigger picture than just, I mean, on the recycling side.
I remember, I mean, during the last five years.
Lyb has invested.
Uh, a buff depreciation levels.
Yeah, so we've invested in a new potba plan. We've embarked on profitable growth. I mean, for the APS business, we've invested in Hyper Zone, the Sassole joint venture. We've launched our Value Enhancement Program. Um, we are well underway here in building up that profitable CNL, LCS business, investing in MRT 1.
Uh, we have our investments in Saudi Arabia. Um, with our joint venture with Aloe Jane, the NetBet joint venture, with a potential to further expand that joint venture. Uh, we've embarked on joint venture discussions and have the allocation um, for.
A big investment that then is smart from a capex point of view and cash point of view is Smart Investments with our partner in Sipcam.
Um and Aaron also mentioned on the acetals business by including new technology, which leads also to some the the bottlenecking of of uh of of the existing capacity. So we also, I mean, based upon where we are in the cycle, we've not fully ran, uh, our assets, uh, at name plate capacity.
Uh, so that gives us, I mean,
A lot of potential. I mean, for growth, even if for now, um, we have a delayed investment in Flex 2, and we have delayed an investment in MRT2. Of course, we continue to monitor the markets. Um, but there is nothing concrete that I can say in terms of M&A.
Thank you.
Time allowed for?
I'll turn the floor back to Mr. Vanner for any final comments.
Participant investments, strategic portfolio management, and our strong balance sheet are key to successfully navigating this prolonged downturn and ensuring that we emerge even stronger. We remain confident that the cycle will eventually rebound. LyondellBasell is well positioned to capture market tailwinds and create durable, long-term value for our shareholders through consistent execution of our strategy. We hope you all have a great weekend. Stay well and stay safe. Thank you.
Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.