LyondellBasell Industries

Hello and welcome to the Lyondell Bissell teleconference. At the request of Lyondell 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, Melissa. 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.liondellbasel.com slash investor relations. 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 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 EBITDA and earnings per share excluding identified items. Additional documentation on our investor website provides 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 November 28th by calling 877-660-6853 in the United States and 201-612-7415 outside the United States. The access code for both numbers is 137-321-41. Joining today's call will be Peter Vanneker, Wind Up Sales Chief Executive Officer, our CFO, Michael McMurray, Ken Lane, our Executive Vice President of Global Olefins and Polyolefins, Kim Foley, our EVP of Intermediates and Derivatives and Refining, and Torkel Renman, our EVP of Advanced Polymer Solutions. During today's call, we will focus on third quarter results, current market dynamics, and our near-term outlook. 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 third quarter 2022 results. Let's begin with our safety results on slide number three. Our team continues to deliver outstanding safety performance in 2022. Bindell Basel's year-to-date incident rate for employees and contractors is 0.12%. roughly half the rate seen in recent years. Safety is a core value at our company and will continue to receive the utmost attention. The focus and commitment our metrics reflect will remain a cornerstone of our company's culture and a key enabler of our future success. Let's now turn to slide number four to discuss our financial results. During the third quarter, as you would expect, Our team remained very focused on cash generation while navigating the well-known, very challenging environment. Lionel Basel's business portfolio faced headwinds from rising costs and weaker demand at the same time. Earnings were $1.96 per share. EBITDA was $1.2 billion. Nonetheless, we delivered an impressive $1.4 billion of cash from operating activities. By the end of the quarter, we increased our balance of cash and short-term investments to $1.5 billion and had $5.3 billion of total available liquidity. The strength of our balance sheet and our disciplined approach to capital allocation enables us to confidently move forward with our strategy while continuing to provide attractive and strong returns to shareholders through all stages of the business cycle. Despite significant headwinds, our company generated a 19% return on invested capital over the past 12 months. On slide number five, we highlight some of Linder Bazel's existing and emerging sources of advantage for generating differential value and high returns over a range of market conditions. Our company is widely recognized for our deep commitment to safe operations, cost management, and operational excellence. These values are part of our DNA. Lenders Brazil's global portfolio of businesses benefit from both geographic and end market diversity. Leading positions in diverse markets balance the portfolio and reduce risks from market concentration. Last quarter, I mentioned the work that is underway to identify a north star that provides clarity and guiding principles for our strategic decisions. Some of the early decisions from this work add to our capability and resiliency for generating value and high returns. Market leadership in circular and low-carbon solutions has quickly emerged as an essential part of our path forward. We believe circular and low-carbon solutions will provide advantage under a wide range of economic scenarios. We will talk about this more in a few moments. An intense and consistent focus on people and culture is a key enabler for driving differential value. On October 1st, we implemented a new organizational structure that will improve agility and accountability across our company. One example is our decision to align strategy and execution by moving the global responsibility for manufacturing under the strategic business unit leaders. The strategic business unit leaders will have the ability to run their businesses based upon the required value propositions and business models. We also launched customer and commercial excellence initiatives to elevate our levels of service, quality, and innovation. With the right organizational structure and improved customer focus, our company will have even more capacity to capture differential value. After a very comprehensive diagnostic phase, a well-structured value enhancement program targeting $750 million in recurring annual EBITDA improvements has been launched. I will describe this program in more detail shortly. When these portfolio advantages are combined with our track record of efficient cash conversion, our investment-grade balance sheet, and our secure steadily growing dividends, I think you will agree that Lionel Basel has the winning formula for generating high returns and differential value for our investors under a wide range of economic scenarios. On slide number six, I would like to share more detail on one of the decisions that quickly emerged from our strategy work, the creation of our new circular and low carbon solutions business unit. In my view, circular and renewable solutions businesses require a differentiated business model and a more entrepreneurial mindset to succeed. We're setting up our new circular and low-carbon solutions business unit with this in mind. This business unit is led by Yvonne van der Laan and is accountable for building scalable technologies and profitable businesses to serve rapidly growing customer demand for our circular and low-carbon solutions. Since we launched the Circulin brand in 2019, we've sold products with more than 150,000 tons of recycled and renewable content. Our current goal is to sell at least 2 million tons per year of these products by 2030, with our new business unit leading the way. For perspective, 2 million tons represents about 20% of our 2021 global sales of polyethylene and polypropylene. In just the past few weeks, we have announced our participation in several agreements related to new capacity for our circular and low carbon solutions business in several regions. We are partnering on plastic waste sorting facilities in Houston and Germany. The sorting plans will convert local plastic waste into usable feedstocks for mechanical and or advanced recycling. In Germany, we expect the facility will provide a material amount of the feedstock required for our first advanced recycling plant using Lionel Basel's proprietary Muratec technology. In India, we are forming a joint venture for a fully automated 50,000 tons per year mechanical recycling facility. And in China, we are developing another joint venture to mechanically recycle post-consumer waste in the Guangdong province. I am confident that these and future actions will accelerate our circular and low-carbon solutions offering to position Linder Basel as the preferred supplier for customers and brand owners, seeking to lower the greenhouse gas impact of their business and increasing the circular content of their products. Our recently announced collaboration with Air Liquide, Chevron, and Uniper on a U.S. Gulf Coast low-carbon hydrogen and ammonia project is but one additional example of our progress. We're quickly and methodically building a robust supply chain to support attractive growth opportunities for our circular and low-carbon solutions business. Let's turn to slide number seven and discuss the launch of our value enhancement program. has a well-earned reputation as a cost leader in our industry. But after 12 years with a singular focus on managing cost, a significant number of untapped value opportunities have accumulated. We believe this untapped value can be unlocked with modest incremental investments in resources. Our value enhancement program utilizes a proven stage-gate methodology to identify, implement, and track progress on hundreds of initiatives across the company. Over 2,000 IDs have been generated, and we have validated more than 1,500 initiatives to date. But we're just getting started. We organize value opportunities into three categories, manufacturing and operational excellence, procurement and supply chain, and commercial excellence. We have confidence that our value enhancement program is capable of achieving an estimated $750 million of annual recurring EBITDA improvement by the end of 2025. With a continuous evergreen process in place, we look forward to regularly extending our goals. We will keep you apprised of our progress and look forward to sharing more details on this program during our upcoming Capital Markets Day in March. Before I turn the call over to Michael, I would like to describe the new organizational responsibilities for the business leaders on this call. Joining us on the call today is Kim Foley, who assumed responsibility for the intermediates and derivatives and refining segments from Turkle Rainman. Kim began her career with our company more than 30 years ago as a chemical engineer and has served in a broad range of leadership roles spanning manufacturing, strategic planning, finance, and supply chain. She is a proven leader with a deep knowledge of our company and a valued voice on our executive committee. Turkel Renman is now in charge of our Advanced Polymer Solutions segment. In order to be a market leader, our APS business requires a customer service focus that is differential from most of Leinder Bazel's other businesses. Turkel will develop the appropriate culture and service model to maximize the full value potential of our APS business. Turkel's prior experience as a CEO at other companies will serve as well in this role. Ken Lane will continue to have responsibility for our two olefins and polyolefins segments. And Jim Guilfoyle, who formerly led APS, is relocating to Rotterdam and reporting to Ken as the leader for the O&P business in Europe, Africa, the Middle East, and India. With that, I will turn the call over to Michael first, and then to each of our business leaders, who will describe our financial and segment results in more detail.