LyondellBasell Industries NV Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Safety: September year-to-date total recordable incident rate was 0.12, better than last year's top decile result.
• Financial Performance: Generated $983 million of cash from operating activities, EBITDA of $835 million, and earnings of $1.01 per share. Returned $443 million to shareholders via dividends.
• Polyethylene Markets: Demand started improving post-COVID downturn, but new capacity needs to be absorbed. Consumer packaging demand remained resilient, and durable goods investments drove growth.
• Ethylene Supply: Capacity rationalizations globally were accelerating, with ~21 million tonnes of ethylene capacity set to close, offsetting China's capacity additions.
• Capital Allocation: Reduced 2026 capital expenditures to $1.2 billion. Cash improvement plan on track to deliver $600 million of incremental cash flow, with $150 million in fixed cost reductions year-to-date.

Segment Performance

• Olefins and Polyolefins Americas: Third quarter EBITDA was $428 million, a 35% quarter-on-quarter improvement. Operating rates were approximately 85% with crackers running at ~95%. The Hyperzone Polyethylene plant in La Porte saw improved operations.
• Olefins and Polyolefins Europe, Asia and International: Generated EBITDA of $48 million. Progressed on the proposed sale of select European assets, with a sales and purchase agreement signed. Expecting softness in Europe in the fourth quarter, with plans to idle a cracker in Wessling, Germany.
• Intermediates and Derivatives: Segment EBITDA sequentially increased to $303 million. Oxyfuels margins were affected by outages, but styrene margins normalized. A planned turnaround of acetyls assets in La Porte was underway.
• Advanced Polymer Solutions: Third quarter EBITDA was $47 million. Cost discipline helped offset headwinds in automotive markets, though near-term demand remained soft.

Guidance

• 2026 capital expenditures reduced to $1.2 billion.
• Cash improvement plan remains on track to deliver $600 million of incremental cash flow by year-end 2025.
• 2025 full year effective tax rate updated to negative 13% due to noncash impairments.
• Expect lower fourth quarter profitability due to typical year-end seasonality and proactive operating rate reductions.

Risks

• Volatility in U.S. exports due to shifting trade and tariff policies.
• Prolonged downturn in European petrochemical and global automotive industries leading to asset write-downs.
• Capacity additions in China pressuring regional supply and demand dynamics.
• Seasonal softness in demand and pricing pressures in Europe and Asia due to imports.

Question and Answer

Q: On polyethylene, how to weight the likelihood of any sort of inflection point in supply and demand or underlying prices and margins into next year?

A: Peter Vanacker discussed capacity rationalizations balancing overcapacity in China, polyethylene demand robustness due to applications, and structural advantages of U.S. feedstock-based costs.

Q: In China, can you discuss what's happening there, including why plants are still running?

A: Peter Vanacker noted plants running at technical minimum capacity mainly due to safeguarding employment, with anti-involution measures expected to lead to closures. Kimberly Foley mentioned adding ethane to the feed slate at the JV.

Q: Could you talk a little bit about the security of the dividend?

A: Peter Vanacker discussed robust cash balance, balanced capital allocation, investment-grade balance sheet, and progress on portfolio management including the sale of European assets.

Q: Your CapEx number for next year projects $1.2 billion below depreciation. Any growth projects left?

A: Peter Vanacker highlighted growth opportunities in Hyperzone, acetyls reliability, MRT-1, PO/TBA, and value enhancement program. Agustin Izquierdo mentioned expected lower payables in Q4 with a working capital release close to $1 billion.

Q: When do your catalyst sales peak and drop off?

A: Peter Vanacker stated catalyst sales depend on asset run rates, with current low activity due to plants running at minimum capacity, but potential increase with market recovery.

Q: Any other material puts and takes in the fourth quarter relative to the third quarter?

A: Peter Vanacker and Aaron Ledet discussed seasonality in oxyfuels margins, planned turnarounds, and ongoing impacts of outages and maintenance on profitability.

Q: On ethylene capacity closures, how many have happened and impact on operating rates?

A: Peter Vanacker and Kimberly Foley discussed ~9.5 million tonnes of ethylene capacity closed, with ongoing announcements, and operating rates varying by region based on cost competitiveness.

Q: Thoughts on the bridge to 2026 in I&D?

A: Aaron Ledet discussed PO rationalization, acetyls turnaround benefits, and capacity improvements in PO/TBA as reasons for optimism in 2026.