LyondellBasell Industries

I'm joined today by Bob Patel, our Chief Executive Officer, and Michael McMurray, our Chief Financial Officer. Before we begin the business discussion, I would like to point out that a slide presentation accompanies today's call and is available on our website at www.LyondellPassell.com. Today, we will be discussing our business results while making reference to some forward-looking statements and non-GAAP financial measures. We believe the forward-looking statements are based upon reasonable assumptions and the alternative measures are useful to investors. Nonetheless, the forward-looking statements are subject to significant risk and uncertainty. We encourage you to learn more about the factors that could lead our actual results to differ by reviewing the cautionary statements, the presentation slides, and our regulatory filings, which are available at www.mindupsell.com slash investor relations. Reconciliations of non-GAAP financial measures to GAAP financial measures together with other disclosures, including the earnings release, are also currently available on our website. Finally, I would like to point out that a recording of this call will be available by telephone beginning at 1 p.m. Eastern Time today until May 31st by calling 800-944-6417 in the United States and 203-369-3942 outside the United States. The passcode for both numbers is 36941. During today's call, we will focus on first quarter results, the current environment, our near-term outlook, and provide an update on our growth initiatives. Before turning the call over to Bob, I would like to call your attention to the non-cash, lower of cost, or market inventory adjustments for LCM that we have discussed on past calls. These adjustments are related to our use of last in, first out, or LIFO accounting in the recent volatility in prices for our raw materials and finished goods inventories. Comments made on this call will be in regard to our underlying business results, excluding the impacts of LCM inventory adjustments. That being said, I would now like to turn the call over to Bob.

Thank you, Dave, and good day to all of you participating around the world. We appreciate you joining us today as we discuss our first quarter results. Before we get into the discussion of our results, I would like to take a moment to recognize the tremendous progress that has been made in fighting the COVID-19 pandemic and how much hard work still needs to be done around the world to reduce the effects of this disease. While financial markets are focused on the economic upside enabled by increased vaccination and the eventual reopening, today our employees, customers, suppliers, and the communities where we operate in India in particular, as well as Brazil and even parts of Europe are still suffering from terribly high case rates and fatalities. We are working closely with governments around the world to do our part to advance immunity for our employees, and their communities, and to hasten an end to the devastation brought on by this virus. Our thoughts remain with those most affected by this pandemic. Now, moving into the discussion of our Q1 results. Blind Elbazel is continuing to build upon the momentum seen in the second half of 2020. During last year's recession, we advanced on our strategic initiatives to grow our asset base and emerge stronger from the downturn to position our company to capture the benefits of a recovering economy in 2021. Let's begin with slide three and review the highlights. In the first quarter, earnings more than doubled from the same quarter of last year to $3.18 per share. LionVal Bazell's first quarter net income improved by 25 percent relative to the fourth quarter as we earned approximately $1.6 billion of EBITDA. Our businesses benefited from strong demand and tight markets that improved margins across the majority of our segments. Our olefins and polyolefins Europe, Asia, and international segment achieved their highest quarterly EBITDA since 2018, while the O&P America segment reached a quarterly EBITDA level that has not been seen since 2015. Strong cash generation enabled us to pay down $500 million of debt in January and end the first quarter with nearly $5 billion of cash and available liquidity. After the quarter closed, we paid down an additional $500 million of debt in April. We expect that our robust cash generation should continue throughout the year, and our top priority for capital deployment in 2021 is debt reduction. which will enable meaningful progress toward improving our credit metrics to two turns of total debt to EBITDA. As we approach the end of the first month of the second quarter, low inventories and persistently high demand are driving higher margins for most of our products. The unusually cold weather and associated power outages that occurred during February in Texas resulted in approximately one month of downtime for a significant share of total U.S. capacity located within the state. Deferred turnarounds from 2020 are resulting in high levels of planned maintenance downtime for many of our competitors during the second quarter. Blind Elvizel has no major planned maintenance for the second quarter at any of the global assets that we operate. We are focused on running our assets safely, reliably, and at maximum rates to supply our customers' needs and capture the opportunities available in these strong markets. We expect markets will remain tight through at least the end of this year due to very high demand, low inventories, and the capacity that will be lost during planned downtime. With customer demand exceeding production, the full extent of our customers' backlogs, deferred consumption, and unmet demand are unknown. In the days after the Texas freeze, North American PE exports fell by 13 percent for the month of February, and we expect the March data to reflect further declines in exports. It will likely require quite some time before North American polyethylene industry can fulfill backlogs, satisfy domestic demand, and return to last year's pace of selling 40 percent of production into the export market to serve global demand. And this scenario of replenishing inventory over the course of 2021 does not factor in an additional wave of demand that is likely to arise in the second half of this year from restocking and increased activity in the travel, leisure, and hospitality sectors as vaccines provide for increased mobility. The reopening and considerable pent-up demand will add another leg of growth across our businesses. Increased mobility and rising demand for transportation fuels should enable our oxy fuels and refining businesses to deliver meaningful profit improvements in the second half of 21 and into 2022. Let's turn to slide four and review our recent safety performance. At Lyondell Vazell, the first topic on the agenda for a meeting of our leadership or any group of employees throughout the company is typically oriented toward improving the health and safety of our teams. Our consistent emphasis on a culture of safety provides clear and direct benefits towards improving the health and welfare of our employees, contractors, and communities. We also believe the attention to detail embedded in our safety culture cascades indirect benefits towards our work to ensure reliable operations, commercial leadership, and ultimately, differential financial performance. As such, I'm pleased to report that in the first quarter of 2021, our employees and contractors achieved the best safety performance we have attained in any prior year. We look forward to continued progress on our journey toward our goal of zero injuries. Earlier this month, we launched our Circulant Portfolio of Polymers described on slide five. to enable our customers and brand owners to improve the sustainability of their products. Circulin Recover Polymers are already in use producing consumer products such as the Samsonite Magnum Eco Suitcase line depicted on the slide. We are stepping up volumes of Circulin Renew Polymers in Europe and advancing our proprietary catalyzed pyrolysis technology at our Moritech molecular recycling pilot facility in Italy with the goal of bringing this potentially game-changing technology for circulant revived polymers to a commercial scale. Over the past 70 years, our polymers have played a central role in advancing modern living by reducing food waste with protective packaging, delivering safe drinking water through plastic pipes, and advancing healthcare with sterile and affordable devices and equipment. With the introduction of our circulant product line, who are making further progress toward Lyondell-Bazell's goal of producing and marketing 2 million metric tons of recycled and renewal-based polymers annually by 2030. On slide six, we highlight how Lyondell-Bazell's technological advancements can enable our customers to independently improve the sustainability profile of their product formulations. Our new hyperzone HDPE process is capable of producing polyethylene with more than five times the crack resistance of standard polyethylene produced with a chromium catalyst in a slurry loop process. This premium performance of polyethylene from our hyperzone multi-zone process can be directly leveraged by customers to produce packaging such as detergent bottles with thinner walls and less polyethylene that reduces weight without sacrificing durability or performance. As our customers seek to improve the circularity of their business models, many plastics converters have set aggressive goals to increase their utilization of post-consumer recycled or PCR plastics in packaging and other applications. Hyperzone's outstanding performance can also be leveraged to allow for increased blending of PCR without sacrificing performance. As you can see in the chart, hyperzone HDPD blended with 25% PCR can still exceed the crack resistance of standard polyethylene by 70%. Our customers are leveraging Lyondell-Bazell's advanced technology to improve the crack resistance, top load strength, impact resistance, and other critical properties for their products while simultaneously improving the sustainability profile of their business models. Now let's step back a bit, and on slide seven, review some of the macroeconomic forces that have been driving Lyondell Vazell's business performance during the pandemic and the ongoing recovery. One way to think about the trajectory of the economy is to untangle a few of the societal trends that are fueling demand in markets for non-durable goods, durable goods, and transportation. In the early days of the pandemic in March, April, and May of 2020, we saw elevated demand for non-durable goods as households engaged in pantry stocking to protect against supply disruptions and adapt to the transition toward increased working from home, schooling from home, and other lifestyle changes associated with quarantines and societal lockdowns. Lyondell Bazell's olefins and polyolefins businesses benefited from the double digit improvement in packaging demand has increased utilization of non-bulk packaging and e-commerce deliveries boosted demand for our materials. In 2021, consumer packaged goods demand remains elevated by single digit percentages relative to pre-pandemic levels. We expect somewhat elevated demand for packaging will persist following the pandemic with some permanent changes in society as a portion of the population continues to work remotely, school remotely, and use home delivery for convenience. The second economic driver for our businesses has been the recovery in consumer, industrial, and construction related demand for durable goods that began in the third quarter of 2020. This trend can be reflected by the dark blue line that tracks the ongoing recovery in vehicle production in North America. With government stimulus supporting the U.S. economy and limited options for travel, leisure, and public dining, consumers remodeled homes and purchased appliances, home entertainment, and vehicles that drove recovery for the industrial economy. This trend has been boosting demand for Lyondell Wiesel's propylene oxide from our intermediates and derivative segment that is used in polyurethane foams for furniture and construction insulation. as well as polymers from our O&P segments that are used both directly and in plastic compounds produced by our advanced polymer solutions segment. The third significant trend is the increased mobility that is developing around the world as vaccination rates improve and activity in the travel, leisure, and hospitality sectors returns to some semblance of normalcy. Increases in vehicle miles traveled are supporting a rebound in crude oil and gasoline prices to bring back margins for our oxy-fuels business in the IND segment. While a slower rebound in international air travel is holding back demand for jet fuel, strong demand for diesel and improving demand for gasoline is expected to improve profitability for Lime Del Vazel's refining segment during the second half of this year. Increased mobility will also benefit our polymer businesses as the restaurant, hotel, and tourism industries restock and begin to address substantial pent-up demand. The sum of these trends points to a strong outlook for both the global economy and Lionel Bezal during the remainder of 2021 and well into 2022. On slide eight, these trends can be seen in first quarter global demand growth for our two largest products, polyethylene and polypropylene relative to pre-pandemic levels seen two years ago in the first quarter of 2019. Over this period, we've seen modest improvements in European demand. In the first quarter of 2021, North American demand was quite strong but constrained by lack of supply due to the downtime triggered by the cold weather and associated power outages in Texas. Northeast Asian demand increased by an astounding 23 percent, driven by the post-pandemic strength of the Chinese economy. Since imports account for approximately 40 percent of China's demand needs for polyethylene, China's growth benefited Lyondell Bazell's production sites in the United States and the Middle East that export polyethylene to China. Global demand for polyolefins has grown by 14 percent over the past two years. far above the long-term trends of 4 percent and 5 percent annual demand growth for polyethylene and polypropylene, respectively. Strong global demand and constrained production have supported polyethylene contract price increases of $950 per metric ton in the U.S. from May 2020 through March of this year. With $420 per ton occurring since November, and more than $300 per ton of additional price increases on the table for April and May of 2021. As demand should get even stronger as we progress through the recovery, we expect tight markets and strong margins for polyolefins to persist into next year. On slide nine, I would like to remind you of our view on the cyclical outlook that we discussed during our fourth quarter call. In January, We talked about concerns that global polyethylene capacity additions, particularly in China, could outpace global demand and depress operating rates and profitability over the coming years. This quarter, we have updated the chart we discussed during the fourth quarter call to address operating rates for both polyethylene and polypropylene. Predictions of reduced operating rates due to new capacity are highly reminiscent of forecasts from consulting reports published in 2016. These are depicted by the dotted blue line, which predicted global operating rates would dip due to capacity additions on the U.S. Gulf Coast from 2017 through 2018. The actual operating rate depicted by the solid line demonstrates that press releases announcing capacity additions often have ambitious timelines and typical delays in construction and commissioning can allow consistent demand growth to absorb capacity additions with less impact on operating rates and margins than predicted. More importantly than delays in capacity, we believe recent forecasts are underestimating demand growth. Early in the pandemic, many predicted declines in PV demand for 2020. By the middle of the year, forecasts improved to flat demand. Most consultants now believe that global polyolefin demand grew by approximately 4 percent in 2020, similar to growth rates seen consistently over the past 30 years. Adjusting these forecasts to 4 percent demand growth for both 20 and 21 results in a predicted operating rate shown by the dotted gray line. Last quarter, we suggested that 2021 would likely follow the patterns seen after prior recessions and this year's demand growth could be higher than the historical trend of 4%. A 7% growth in demand during 2021 for only one year with reversion to the historical mean in 2022 and beyond would generate the robust operating rate forecast depicted by the dotted orange line. Today, with global polyolefin demand growing in the first quarter by 14% over the past two years, we are even more confident that the recovering economy is likely to facilitate a more orderly absorption of this new capacity by the global market, which should support robust margins. With that, I will turn the call over to Michael, who will describe our financial and segment results over the past quarter.

Thank you, Bob, and good morning, everyone. Please turn to slide 10, and let me begin by highlighting our track record of strong cash conversion. Over the last 12 months, Lime Del Bazelle converted almost 80% of our EBITDA into $3.4 billion of cash from operating activities. In the first quarter of 2021, our businesses delivered over 40% more pre-operating cash flow relative to the same period last year. We expect continued improvement of our LCM performance as we progress through each quarter of 2021. Let's turn to slide 11 and review further details of our cash generation and deployment during the first quarter. As Bob mentioned, our goal for this year is to accomplish meaningful deleveraging to further strengthen our investment-grade balance sheet. In the first quarter, while paying dividends of $352 million and investing a similar amount in capital expenditures, we reduced the balance on our term loan by $500 million to close the first quarter with cash and liquid investments of $1.8 billion. After the quarter closed, we repaid an additional $500 million on the term loan in April. We expect that robust cash generation should enable continued progress on deleveraging throughout the year. Before I continue with a more detailed discussion of our segment results, let me provide a brief update on our 2021 modeling guidance. We continue to be on track to invest approximately $2 billion in capital expenditures during 2021, targeted equally towards profit-generating growth projects and sustaining maintenance. Due to extremely strong demand for propylene oxide, we have shifted a turnaround at one of our POTBA units in Bayport, Texas, from the second quarter to the third quarter of this year and reduced the scope and associated downtime for the maintenance. With this change, we expect no major planned maintenance downtime in the second quarter of 2021. And based on expected volumes and margins, we estimate that the third quarter EBITDA impact due to lost production associated with planned maintenance across the company will increase by $30 million to $75 million. In total, the EBITDA impact associated with all of Lionel Bezell's 2021 planned maintenance downtime should decrease by $30 million relative to our original guidance to approximately $140 million for the year. Let's turn to slide 12 and review our quarterly profitability. In the first quarter of 2021, Lime Del Bezel's business portfolio delivered EBITDA of $1.6 billion. This was an improvement of more than $300 million relative to the fourth quarter, exceeding typical first quarter seasonal trends. The upward trajectory of Linedale-Bazell's profitability reflects improving demand and margins for our products driven by the recovering global economy and tight markets. As Bob mentioned, cold weather and associated power outages resulted in unplanned shutdowns that constrained first quarter production for Linedale-Bazell and nearly all of our competitors in the state of Texas. This downtime was exacerbated by strong global demand that tightened markets in elevated margins across most of our businesses. While it's clear that we lost production during the first quarter due to unplanned downtime, the offsetting effects of higher margins and sales from inventory complicates the effort to quantify the impact on first quarter business results. In the second quarter, we plan to operate our assets at nearly full rates as profitability improves for oxy fuels and refining businesses. We expect further EBITDA improvement during the second quarter. On the left side of the chart, our all-time high quarterly EBITDA, excluding LCM, of approximately $2.2 billion reported in the third quarter of 2015 provides useful perspective. While profitability for transportation fuels was quite strong in 2015, today our company has more earnings power from a larger asset base. Over the last six years, we have added ethylene capacity at Corpus Christi, expanded our compounding business through the acquisition of A. Shulman, started a new hyperzone HDPE plant in Houston, and added significant joint venture capacity in Louisiana and China. In 2021, Lionel Bezell is poised to capture opportunities that are emerging in the rebounding global economy with a larger asset base. Now, let's review the first quarter results for each of our segments. As mentioned, My discussion will describe our underlying business results, excluding the non-cash impacts of LCM inventory changes. I will begin with our olefins and polyolefins America segment on slide 13. Third quarter EBITDA was $867 million, $145 million higher than the fourth quarter. Tight markets and strong demand resulted in improved margins, driving quarter results higher than we have seen since 2015. OLFN results increased approximately $155 million compared to the fourth quarter. OLFN's margins increased with higher ethylene and propylene prices outpacing higher feedstock and utility costs. Volumes decreased due to downtime driven by Texas weather events, partially offset by a full quarter of volume from our Louisiana joint venture that we formed in December. The ethylene cracker at the joint venture ran continuously throughout the weather events and exceeded ethylene nameplate operating rates by 9 percent during March. Polyolefin results for the segment decreased by about $15 million during the first quarter. Polyethylene margin decreased while polypropylene margin improved. Polyethylene volume increased due to a full quarter of contribution from the Louisiana joint venture, partially offset by lost production during the weather events. We anticipate both volume and margin improvement for our O&P Americas segment during the second quarter. Volumes are expected to rebound in the absence of weather-related downtime. Tight markets due to high demand, low inventories, and customer backlogs are expected to continue to support strong integrated chain margins. Now, please turn to slide 14 to review the performance of our Olphans and Poly-Olphans Europe, Asia, and International segments. During the first quarter, EBITDA was $412 million, $161 million higher than the fourth quarter. Strong demand, expanded margins, driving quarterly results higher than we have seen for the segment since 2018. Olfin's results increased $30 million, driven by increased margins and volumes. Ethylene margin improved due to increased ethylene prices and lower fixed costs, despite higher feedstock costs. Demand was robust during the quarter, and we increased volumes by operating our crackers at a rate of 98 percent, almost 10 percent above industry benchmarks for the first quarter. Combined polyethylene results increased approximately $150 million compared to the prior quarter. Strong polymer demand drove spread improvements for both polyethylene and polypropylene prices relative to monomer. Margin improvements at our Middle East and Asia joint ventures were offset by higher LPG feedstock costs pressuring profitability at our new board joint venture in China, resulting in little change in equity income for the segment. During the second quarter, we expect strong demand and tight markets to drive further margin improvement for our O and P EAI businesses. Please turn to slide 15 as we take a look at our intermediates and derivatives segment. First quarter EBITDA was $182 million, $14 million lower than the prior quarter. Margins improved with higher product prices while volumes declined due to the Texas weather events and planned maintenance in our propylene oxide and derivatives business. First quarter propylene oxide and derivative results decreased by approximately $35 million due to lower volumes offsetting stronger margins driven by tight market supply. Intermediate chemical results decreased about $55 million due to lower volumes as a result of the weather events. oxyfuels and related products, results increased by approximately $25 million as a result of higher margins benefiting from improved gasoline prices that were partially offset by constrained volumes. We expect both volumes and margins to improve for our IND segment in the second quarter. Strong demand for durable goods coupled with continued tight market supply are expected to increase profitability across most of the businesses in this segment. Now, let's move forward and review the results of our advanced polymer solution segment on slide 16. First quarter EBITDA was $135 million, $9 million higher than the fourth quarter. Volumes improved driven by higher demand for our products, partially offset by lower margins. Compounding and solution results were relatively unchanged, with higher volumes driven by improved demand being offset by compressed margins due to rising feedstock costs. Advanced polymer results increased by approximately $15 million due to both higher margins and volumes. In April, North American feedstock costs for our polypropylene compounds rapidly declined to reverse much of the price escalation that occurred during the first quarter. We expect that falling feedstock prices combined with continued price improvements for our compounded products will expand margins during the second quarter. Now, let's turn to slide 17 and discuss the results for our refining segment. First quarter EBITDA was negative $110 million, a $36 million decrease versus the fourth quarter of 2020. Higher cost for renewable fuel credits, or RENs, and lower crude throughput overwhelmed improvements in the Maya 211 industry crack spread. In the first quarter, the Maya 211 crack spread increased by $5.21 per barrel to $15.32 per barrel, As a result of the Texas weather event, the average crude throughput at the refinery fell to 152,000 barrels per day. In April, we continue to see improvements in refined product demand, and we are running the refinery at nearly full rates. Strong demand for diesel and improving demand for gasoline is expected to improve both volumes and margins at our refinery during the second half of this year. However, we don't expect a full recovery until there is further progress in vaccination rates and a rebound in global demand for jet fuel driven by increased business and international air travel. Please turn to slide 18 as we review the results of our technology segment. First quarter technology segment EBITDA was $94 million, $49 million higher than the prior quarter. Catalyst profitability increased with customers rebuilding inventories and increased demand from Asia and the Middle East. Based on anticipated timing of upcoming licensing milestones and catalyst demand, we expect that second quarter technology business profitability will be similar to the first quarter. With that, I'll turn the call over to Bob.