LyondellBasell Industries

Hello, and welcome to the Lionel Bissell teleconference. At the request of Lionel Bissell, 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 Kinney, Head of Investor Relations. Sir, you may begin.

Thank you, Operator. Before we begin the discussion, I would like to point out that a slide presentation accompanies today's call and is available on our website at www. We encourage you to learn more about the factors that can lead our actual results to differ. by reviewing the cautionary statements in the presentation slides and our regulatory filings, which are also available on our investor relations website. 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 p.m. Eastern time today. until August 29th by calling 877-660-6853 in the United States and 201-612-7415 outside the United States. The access code for both members is 137-299-09. Joining today's call will be Peter Vaneker, Lionel Basel's Chief Executive Officer, our CFO, Michael McMurray, Ken Lane, our Executive Vice President of Global Olefins and Polyolefins, Torkel Redman, EVP of Intermediates and Derivatives and Refining, and Jim Guilfoyle, EVP of Advanced Polymer Solutions and Supply Chain. During today's call, we will focus on second quarter results, current market dynamics, and our near-term outlook. Before turning the call over to Peter, I would like to call your attention to the non-cash, lower-of-cost, or market inventory adjustments, or LCM, and impairments that we have discussed on past calls. LCM adjustments are related to our use of last-in, first-out, or LIFO accounting. and the volatility in prices for our raw materials and finished goods inventories. Impairment charges were recognized to write down assets to their estimated fair value. Impairments include the non-cash impairment of $69 million in the second quarter of 2022 that reflects the exit of our polypropylene business in Australia and the non-cash impairment of $624 million in the fourth quarter of 2021 that reflects our evaluation of strategic options for the Houston refinery. Comments made on this call will be in regard to our underlying business results, excluding the impacts of impairments in LCM inventory adjustments. 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 2022 results. Let's begin with a short introduction of myself on slide number three. I'm very grateful to be here on my first earnings call since becoming CEO of Leyendel Basel on May 23rd. I grew up in Belgium and undertook an education as a chemical engineer with a specialization in polymer engineering. During my more than 32 years in the chemical industry, I have had the pleasure of working with Leyendel Basel as a customer, a supplier, and a partner. During my time with Bayer, we invested in Leyndell's technology and assets while forming joint ventures for the production of propylene oxide. At Treofan, Leyndell Basel was our largest polypropylene supplier. And at Neste, we partnered with Leyndell Basel to achieve the world's first commercial production of polyethylene and polypropylene from Neste's sustainable bio-based feedstocks. Since joining the Board of Directors in February and then starting as CEO in May, I have been meeting extensively with stakeholders around the world to learn more about how Linder Basel has been so successful in creating value. More importantly, we have been asking ourselves how to best position the company to sustainably capture further value for years to come. I've always admired Lionel Bazel's rich legacy of innovation and technology development, and I am pleased to confirm that our commitment and passion for safety and operational excellence are deeply embedded in our culture. These qualities will serve as well as work gets underway to advance our capabilities, to capture latent value embedded within the company and establish Lionel Bazel as a leader in serving the world's growing needs for circular and sustainable materials, while reducing our carbon footprint. As Dave mentioned, additional members of our executive committee will join our earnings calls starting today. I believe that it is important for our investors to get to know our excellent leaders at Leyendel Basel better. And I'm really impressed by this team, their market knowledge and leadership. and their passion for safety and value creation. Let's now turn to slide number four to discuss our excellent results during the second quarter. I am very happy with the outstanding work that Lijndel Basel's leadership and employees have accomplished. This is a great way to start and gives me a lot of confidence for the future. Our businesses delivered strong earnings and cash generation during the second quarter and driven by record results from our intermediate and derivative segments, and strong refining margins. Linder Basel's broad portfolio provided clear benefits as revenue grew sequentially by 13%, while margins expanded to support a more than 20% improvement in EBITDA. Earnings were $5.19 per share, And EBITDA was $2.5 billion, which resulted in $1.6 billion of cash from operating activities. Altogether, our company generated an impressive 24% return on invested capital over the last 12 months. Let's turn to slide number five and review our safety performance. Lionel Basel's commitment to safety leadership is outstanding and well-known. As a CEO, I will make sure that safety remains a consistent and unwavering cornerstone of our company's culture. During my career, I have witnessed that companies that are leaders in safety are also best in class in reliability and productivity, and as a result, in value creation. In 2022, the year-to-date total recordable incident rates for our global workforce improved by more than 40% to 0.12. This represents substantial progress towards our ultimate goal of zero injuries. I want to commend all of our employees and contractors for their clear commitment to goal zero. On slide number six, we highlight some of our recent progress towards our sustainability goals. Linder Basel's products technologies and solutions provide very important contributions to a more sustainable world. In addition, we have committed to industry-leading sustainability targets that improve this value. Over the past few weeks, we signed four renewable power purchase agreements for 380 megawatts of electrical generation capacity in Texas. These wind and solar projects will be able to supply more than 10% of Lijndel Basel's global electricity needs and represent meaningful progress towards the company's climate goal to procure a minimum of 50% of our electricity from renewable sources by 2030. These projects are expected to reduce the company's annual carbon dioxide emissions by approximately 370,000 tons and represent the average annual electricity needs from about 100,000 U.S. homes. In addition to our renewable energy goals, Linder Basel is growing our production of plastics utilizing renewable feedstocks under our Circle & Renew brand. Last year, we processed 12,000 tons of renewable feedstock in Europe, and we are forecasting to increase this number to 40,000 tons across both Europe and the United States during 2022. This material is being run through our existing ethylene cracker assets in Westling, Germany, and Channelview, Texas, with the goal to increase scale over the coming years since we see that the demand for these products is growing. The growth of renewable feedstocks is one part of our broader mission to expand the reach of our sustainable products, including those sold under the Circle & Brand. Since launching our Circle & Brand in 2019, we have sold over 140,000 tons of products based on recycled and renewable feedstock. This represents more than the amount of polyethylene and polypropylene consumed by the population of Houston in one year. Eindel Basel is doing more than simply talking about the circular economy. We are building real businesses that can help provide a more sustainable future for our customers and society. Please turn to slide number seven to review our quarterly profitability. During the second quarter, our business portfolio delivered $2.5 billion of EBITDA, an improvement of $430 million compared to the prior quarter. Leinder Basel's results reflect how our global business portfolio can serve changing consumer needs. As in-person activities resume and global travel recovers, our oxyfuels and refining businesses are benefiting from increased demand. Strong North American demand and favorable NAFTA costs supported margins for our products in the Americas and Europe respectively, while higher ethane and energy costs as well as inflation created headwinds in these regions. We started to see moderating European demand due to high inflation at the end of the second quarter and continue to pass through elevated energy and feedstock costs in the prices of our products where possible. During the quarter, China's zero COVID measures and logistics constraints continued to impact both regional and global markets. We expect progress in China will continue to be challenging over the next few months, but anticipate that demand will recover towards the end of 2022. Let us turn to slide number eight and review Linder Basel's earnings power over the course of the first complete business cycle for our company. From 2011 to 2019, our portfolio of businesses delivered an average of $6.7 billion of EBITDA. Favorable markets and our growing asset base delivered $9.2 billion of EBITDA over the last 12 months, an increase of nearly 40% over the prior cycle average. With the commissioning of our new propylene oxide capacity underway, we expect that Linder Basel's stepped-up earnings performance will provide resilience through the next business cycle. And with that, I will turn the call over to Michael first, then to each of our business leaders who will describe our financial and segment results in more detail.