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, Operator, and welcome everyone to today's call. Before we begin the discussion, I would like to point out that a slide presentation accompanies the call. and is available on our website at investors.lyondellbassell.com. Today, we will be discussing our first 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 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. 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 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 May 27th by calling 877-660-6853 in the United States and 201-612-7415 outside the United States. The access code for both numbers is 13746205. Joining today's call will be Peter Vaneker, Wind Up Cell's Chief Executive Officer, our CFO, Augustine Izquierdo, Kim Foley, our Executive Vice President of Global Olefins and Polyolefins and Refining, Aaron Ledet, our EVP of Intermediates and Derivatives, and Torkel Renman, our EVP 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 first quarter results. These are challenging and volatile times, but I am proud that our team continues to navigate extremely well. Let's begin with slide three, where we highlight continued leadership in safety performance at LYB. Our operational success starts with our core focus on safety. Our goal zero commitment is to operate with zero incidents through ownership, excellence, and teamwork. This is demonstrated by our March year-to-date total recordable incident rate of 0.12, improving on our very low rates from 2023 and 2024. We see continuous improvement across all aspects of our business. But it is particularly meaningful to see this progress in our safety performance, which enables our employees and contractors to return home safely day after day, keeping our operations reliable and underpinning financial value. I'm deeply grateful for the commitment and dedication our team has shown. On slide four, we highlight how we continue to focus on executing our strategy and taking decisive steps while navigating a prolonged downturn and adapting to elevated market uncertainty. Since launching our new strategy at our Capital Markets Day in March 2023, we have been actively reshaping our portfolio. In 2023, we closed our Italian polypropylene assets Last year, we sold the EO&D business and we ceased refining operations in February of this year. In March, we announced the closure of our Dutch PO joint venture with Covestro. And we intend to update you on the progress for the remaining five assets in our European strategic review by the middle of this year. The portfolio management activities we have executed since 2023 have reduced our annual fixed cost expenditures by approximately $300 million net of one-time costs and the reduced ongoing costs we expect for the Houston refinery side. Our Value Enhancement Program, or VEP, continues to build momentum and deliver value to the bottom line. as it becomes part of our everyday way of doing business at LYB. We are on track to unlock $1 billion in recurring annual EBITDA by the end of this year, with $50 million of this coming from fixed cost reductions. Additional fixed cost reductions are expected following our European Strategic Review. The remaining five sites incurred fixed costs of approximately $500 million in 2024. We managed our capital expenditures wisely throughout the cycle. In 2023, we finished the year with CapEx investments that were approximately $100 million below our initial guidance. And in 2024, we reduced our spending by approximately $300 million relative to guidance. Our proactive approach to working capital management delivered $100 million of cash in 2024. This exemplifies our commitment to responsible cash management and capital deployment. We are continuing this momentum while responding to the current market environment with an additional $500 million cash improvement plan that is highly focused on improving cash flows during 2025. This is the deepest and longest downturn of my career. And while this is likely to be prolonged by volatile trade policies, I remain confident that we will eventually see a recovery. Our plan is to navigate the downturn without compromising our strategy and emerge stronger, more resilient, and more profitable than before. Our 2025 Cash Improvement Plan, or CIP, has three initiatives. The first is a $100 million reduction in capital expenditures. Our Moritech 1 and Flex 2 growth projects and sustaining capex for safety and reliability will remain priorities as we defer some of our smaller growth investments. Our second initiative of the CIP is an additional $200 million reduction in our working capital targets for the year. In addition to typical levers for managing inventories and payables, one example from our initiative is capturing value from strong markets for precious metals by reducing excess catalyst inventories. The third initiative entails at least $200 million in additional fixed cost savings by further streamlining our organization across our manufacturing, business, and corporate functions. These are difficult but necessary decisions required by these challenging times. And as you can see, these types of actions are not new to LYB. We have been steadily transforming our company over the past two years, and we are confident that we are taking appropriate steps to build a stronger and more resilient LYB. Needless to say, Tariff risk is at top of mind of everyone. On slide five, we give some context on why we believe our robust global supply network served us well during prior trade volatility and is well placed to provide resilience across a range of trade scenarios. The company's global supply network is mainly positioned to serve local demands. for our polyethylene and polypropylene polymers, approximately 75% is sold in local markets and not subject to direct impacts from tariffs. In the U.S., our domestic market share for PE is typically 10 percentage points higher than the North American industry. Globally, less than 10% of our polyolefin sales volumes are likely to see direct impacts from escalating tariffs and counter tariffs involving U.S. trade. And if trade barriers end up impacting our cost advantage U.S. exports, we have the ability to shift supply toward cost advantage production in Saudi Arabia and then backfill Saudi trade with U.S. volumes. LYB understands the optionality embedded in our global supply network. And just like in the past, our teams have immediately started optimizing trade flows. The same principles apply to our propylene oxide business. We outline our global supply network on slide 21 of the appendix to this slide deck. Of course, the secondary effects of tariffs are more complex and remain a source of uncertainty. But even amid global economic volatility, we remain confident in the resilient consumer demands for packaged foods, healthcare, and other essential solutions for everyday life enabled by our products. Our cost-advantaged feedstock positions place us at a favorable spot on the global cost curve. And our investment-grade balance sheet enables us to remain steadfast in our strategy and continue to execute projects that will surface well when markets inevitably recover. On slide six, we turn to one of those projects, Flix2, where we reached a final investment decision milestone in the first quarter. Our new Flex2 project aligns with our strategic pillar to grow and upgrade the core. The project leverages our cost advantage feedstock position and proven technology to convert ethylene into a higher value propylene at the cost of only a few pennies per pound. This technology has greater reliability, lower capital intensity and lower carbon intensity than competing technologies such as propane dehydrogenation. The project also benefits from the capability to upgrade four carbon or C4 streams into high value coproducts and capture synergies with our existing flex units to further boost profitability. This new capacity will profitably reduce our net long ethylene position in North America. Our net short propylene position, which was increased by the exit from refining, will also be reduced. Flex2 will strengthen our market position and reduce monomer costs for our downstream polypropylene and propylene oxide businesses. We will start construction later this year. and expect to begin operations in late 2028. The financial return profile for the project is strong, with an IRR in the mid-teens and an estimated EBITDA benefit of approximately $150 million per year post-startup. We plan to spend approximately $800 million in capex for the project, with peak spend of about $300 million expected next year. On slide seven, we outline our awards for a new feedstock allocation in Saudi Arabia that will enable a longer-term joint project with SIPCAM. The allocation from the Saudi Arabian Minister of Energy provides sufficient ethane and butane feedstocks to support the 1.5 million metric ton ethylene cracker with downstream polyolefin derivatives. The Saudi project is expected to include the LYB proprietary catalogue technology for producing specialized elastomeric polyolefins used in roofing membranes and other high-value applications. We currently operate four catalogue plants around the world. The plant in Ferrara, Italy, is shown in the photograph. LYB and SIPCAM have launched a joint feasibility study for a complex in Jubail that could start up as soon as 2031, pending FID. With LYB's 40% position, the value of our process technology and catalyst contributions supported by funding from project-based depth, this project with SIPCAM fits our strategy for disciplined growth. Please turn to slide 8. as we review the financials for the quarter. Earnings were 33 cents per share, with EBITDA of nearly $600 million. Profitability was impacted by the challenging backdrop and the significant turnarounds of our channel view complex. Cash returns to shareholders remained robust at approximately $500 million, as our ordinary dividend was supplemented by opportunistic share repurchases during the quarter. I will now hand over the call to Augustin to elaborate on our financial progress.