Omv Ag

Welcome to the OMB's group third quarter 2024 results conference call and webcast. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 and 1 on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press star 1 and 1 again. Please be advised that today's conference is being recorded. At this time, I would like to refer you to the disclaimer which includes our position on forward-looking statements. These forward-looking statements are based on beliefs, estimates, and assumptions currently held by an information currently available to OMV. By their nature, forward-looking statements are subject to risks and uncertainties that will or may occur in the future and are outside of the control of OMV. Therefore, recipients are cautious not to place any reliance on these forward-looking statements. OMB disclaims any obligation and does not intend to update these forward-looking statements to reflect actual results, revised assumptions and expectations, and future developments and events. This presentation does not contain any recommendation or invitation to buy or sell securities in OMB. I would now like to hand the conference over to Mr. Florian Greger, Head of Investor Relations. Please go ahead, Mr. Greger.

Yes, thank you. Good morning, ladies and gentlemen. Welcome to OMV's earnings call for the third quarter of 2024. With me on the call are OMV's CEO, Alfred Stern, and our CFO, Reinhard Florey. As always, Alfred will walk you through the highlights of the quarter and will discuss OMV's financial performance. Following his presentation, both gentlemen are available to answer your questions.

And with this, I'll hand it over to Alfred.

Thank you, Florian. Ladies and gentlemen, good morning, and thank you for joining us. Despite a softer macro environment characterized by lower oil prices and a further decline in refining margins and the outage in Libya, OMV has continued to deliver solid earnings. This performance was underpinned by significantly increased earnings in chemicals and a very strong retail business. At 4.4 billion euros, cash flow from operations in the first nine months remained strong and was only slightly below the same period last year. In the third quarter, the trend crude oil price experienced a downward trend because of concerns about fourth quarter demand and the year ahead, largely driven by lower-than-expected demand growth in China. The European gas hub prices increased despite high gas storage levels in Europe, on the back of geopolitical developments in the Middle East, and concerns about a stop to Russian supplies through the Ukrainian pipeline. European refining margins were very volatile, reaching a yearly low in August, but they regained some strength in September. Recurrent expected summer demand exerted pressure on gasoline crack spreads, while falling freight rates increased import volumes from the Middle East and the U.S. Oil indicator margins in Europe increased compared to the previous quarter, supported by declining NAFTA prices and continued logistical challenges in the Red Sea. However, the market fundamentals did not change much. The market is still affected by the macroeconomic slowdown and downturn in several sectors like construction, automotive, and consumer goods. Polyolefin indicator margins improved slightly compared to the previous quarter. Compared to the strong prior year quarter, the clean CCS operating result declined by 21% to around 1.1 billion euros. This was driven by a decline in fuels and feedstock on the back of significantly lower refining margins and lower oil and gas sales impacted by the outage in Libya. A considerably improved chemicals result partly compensated for this. The clean CCS tax rate remained stable at 47%. as the impact of the outage in Libya was offset by higher sales in the UAE, a lower share of results from low-tax businesses, and additional one-off effects. Consequently, clean CCS earnings per share declined by 20%. Thanks to our integrated business model, cash flow from operating activities decreased, rose by around 240 million euros compared with the previous quarter to more than 1.4 billion euros. The improved chemical segment accounted for one-third of the group's total cash flow in the third quarter of this year. However, compared to the strong third quarter of last year, cash flow from operating activities decreased by some 280 million euros. Polyolefin sales volumes, including joint ventures, grew by 9% year-on-year. Fuel sales volumes were notably robust and increased marginally. Oil and gas production was 9% lower year-on-year. In August, we completed a successful test. We remain focused on executing our strategy. In August, we completed a successful exploration drilling campaign in the Norwegian Sea. The well-encountered gas with estimated recoverable volumes between 30 and 140 million DOE. The discovery is approximately 65 kilometers from an existing gas pipeline and the Asta Hanstein gas hub. and could unlock significant potential in the area. OMV Pekrom closed the acquisition of several photovoltaic projects from the Danish company Janssen Renewables. The projects are now at the ready-to-build stage. The installed power of these photovoltaic parks will be around 710 megawatts. Putting them among the most significant projects of this type and development stage in southeastern Europe. Additionally, OMV Petrom completed the acquisition of the 50% share in Electrocentrale Borgesti from Renovatio Infrastructure. The latter owns renewable energy projects with a capacity of approximately 1,000 megawatts, comprising mainly wind power farms. which are expected to start production between 2025 and 2027. With this transaction, OMV Petron became a producer of renewable energy, as a small part of the assets are already producing and delivering renewable energy to the grid. Taking into account all the announced renewable power projects, OMV Petrom's annual production share is projected to reach around 2.4 terawatt hours. We are therefore on track to achieve our 2030 strategic goal of 3 to 4 terawatt hours of renewable power. In chemicals, we have entered into an agreement with Infineon, the world's first supplier of commercial volumes of e-NASDAQ. in order to expand our portfolio of sustainable products. The e-NAFTA is produced using renewable power, water, and CO2, and has nearly zero process emissions. The volumes will be manufactured in Texas by Infineon and shipped to Port-a-Ice's Portable Facility in Finland. Let me now come to the performance of our business segments. Compared to the third quarter of 2023, the clean operating result of chemicals grew substantially by 146 million euros. This growth was primarily driven by an improved market environment and higher sales volumes, while inventory valuation effects were still negative at minus 14 million euros, similar to the prior year quota. In our European business, we recorded positive market effects of 114 million euros, attributable to rising olefin and polyolefin indicator margins. The utilization rate of our European crackers increased substantially by 13 percentage points to 83%. The outage at the Burghausen refinery was more than compensated for by higher utilization rates at other crackers, which had undergone bland turnarounds in the same quarter of 2023. The contribution of Borealis, excluding joint ventures, grew strongly by €118 million, thanks to a considerably stronger polyolefin business. Compared to the third quarter of 2023, the polyolefin sales volumes, excluding trans-ventures, rose by 12%. We have seen an increase in all Borealis end-use industries on the back of slightly better demand, as well as additional volumes following the acquisition of the sustainable compounder Realty and mechanical recycler Integra. the sales volumes and the total realized margin increased for both standard and specialty products. The contribution of the JVs grew by 19 million euros as a result of better performance at Boruche and a less negative contribution from Baystar. The Boruche result improved primarily due to record production levels and highest ever quarterly sales volumes and increased benchmark premiums. The contribution from BayStar also improved, driven by a significantly higher cracker utilization rate of around 90%. Additionally, we were able to increase sales volumes due to the ramp-up of the BayStar polyethylene plant. While Baystar achieved a positive EBIT in the third quarter, its net income contribution and consequently its contribution to R&D is not yet positive, though it showed an improvement compared to the second quarter. The clean CCS operating result of fuels and feedstock decreased to 204 million euros, driven by significantly lower refining indicator margins in Europe and the Middle East. This was partially compensated for by a strong retail contribution and higher supply effects. The refining indicator margin for Europe declined by $9 per barrel, resulting in a negative impact of around 230 million euros. The refining utilization rate was stable compared to the prior year quarter, as the CDU outage at the Burghausen refinery was compensated for by a higher utilization rate at Schwechat. The retail contribution was stronger compared to the third quarter of 2023, driven by excellent unit margins and slightly higher sales volumes. This growth was supported by the recently acquired filling stations in Austria and Slovakia, which are strategically strengthening our refinery integration. The commercial result was slightly lower due to marginally reduced margins, though this was partially offset by a slight increase in sales volumes. The contribution from APNOC refining and global trading decreased significantly by 64 million euros, impacted by lower refining and trading margins. The clean operating result of the energy segment decreased to €702 million, mainly because of lower sales volumes. A better gas marketing and power result was able to partly offset this. The market effect supported the result by €8 million compared to the third quarter of 2023. slightly lower oil and gas prices, and an unfavorable euro-dollar foreign exchange were compensated for by a decrease in the gas-related supplemental taxes in Romania. Production volumes decreased by 32,000 POE per day due to the unplanned outages in Libya between early August and the end of the third quarter. along with planned maintenance activities and natural decline in Norway and New Zealand. In turn, we saw increased output in the United Arab Emirates and in Malaysia, driven by the ramp-up of Jeroen. Production costs increased to over $10 per barrel, mainly on the back of lower production. Sales volumes decreased by 39,000 BOE per day, in line with the production profile. The result for gas marketing and power increased by 43 to 63 million euros. This growth was primarily driven by a significantly higher contribution of 123 million euros from GasWest. The prior year quarter for GasWest was adversely impacted by a one-off transport provision, which was much less significant in the third quarter of this year. The result of gas and power in Romania decreased considerably due to a significant decline of the power business result impacted by the change in legislation that came into effect in April 2024, as well as lower gas margins and increased storage costs. Turning to cash flows. At 1.4 billion euros, our third quarter cash flow from operating activities was solid. However, it declined by 25% compared with the strong prior year quarter on the back of lower net income impacted by the softer macro environment. Net working capital effects in the quarter were marginally positive while they were negative in the prior year quarter. This means the cash flow from operating activities came in 17% lower versus the prior year quarter. Cash flow from investing activities showed an outflow of more than 1 billion euros compared to around 250 million euros in the prior year quarter, which was positively impacted by the successful divestment of the Borealis nitrogen business. The outflows in the third quarter of 2024 were related to the acquisition of a filling station network in Austria, investments in renewable energy projects in Romania, and additional drawdowns linked to the financing of Borush 4. Over the nine-month period, cash flow from operating activities, excluding networking capital, was 18% higher than in the same period in the previous year. Net working capital effects were positive, but lower by approximately €800 million compared with the first nine months of 2023. As a consequence, at €4.4 billion, the cash flow from operating activities was 4% below the prior year period. Cash flow from investing activities for the nine-month period amounted to 2.8 billion euros, representing a 37% increase compared to the same period in 2023. This rise is mainly attributable to two factors. The positive impact of the divestment of the nitrogen business in July 2023 and and a series of strategic acquisitions made in 2024, including renewable projects in Romania, filling stations in Austria, and mechanical recycling capacities in Bulgaria. Our free cash flow before dividends was around 1.7 billion euros. Moving on to the balance sheet. In the third quarter, our net debt increased marginally to 3.4 billion euros, while our leverage ratio remained stable at 12%. Please note that we expect that the investment of our Malaysia business to be completed by year-end for an overall cash consideration of approximately $900 million, subject to closing adjustments. At the end of September, OMV had a cash position of 5.9 billion euros and 4.2 billion euros in uncommitted credit facilities. Before we discuss the outlook for the rest of the year, I would like to provide an update on the status of the gas marketing and trading activities of OMV Over the past two and a half years, we have made remarkable progress in securing and diversifying our gas supply sources. These efforts have successfully eliminated our dependency on Russian gas, representing a significant milestone in enhancing the energy security and stability of our operations. We have secured annual transport capacities through Germany and Italy of up to 40 terawatt hours for 2025 and 2026, and up to 27 terawatt hours for 2027 and 2028. These volumes ensure that we can fully meet our customer requirements in Austria. Our gas supply sources include our equity production in Norway, which yielded approximately 25 terawatt hours in 2023, as well as long-term third-party contracts with non-Russian players amounting to around 20 terawatt hours. Additionally, our stake in the LNG gate terminal in Rotterdam provides us with around 36 terawatt hours per year, forming a robust backbone for our supply chain. Looking ahead, the start of the Neptune TIG project in 2027 is expected to further enhance Romania's role as a regional energy player. OMV currently receives approximately 5 terawatt hours of gas monthly from Gazprom. In the event of a delivery cut, we are prepared to immediately switch to other sources and still meet all our customer commitments. As we hedge the Russian volumes one month ahead, we would need to purchase any missing volumes on the spot market. Should European hub prices rise in response to a supply cut we may face a certain risk. However, this risk is limited to the short term, at most one month, and in our view, is limited financially. For example, if spot prices were to increase by five euros per megawatt hour, it might negatively impact our clean CCS operating result by 25 million euros. However, please keep in mind that in such a scenario, we would benefit from higher European gas hub prices in our E&P business. From today's perspective, the overall impact on OMV from a potential stop of Russian gas deliveries is estimated to be rather small. Let me conclude with an updated outlook for this year. Given the recent decline in the Brent oil price, we now estimate that the full-year value will range between $80 and $85 per barrel. We continue to maintain our forecast for the THC gas price at 30 to 35 euros per megawatt-hour and for the OMV average realized gas price at around 25 euros per megawatt-hour. In the chemicals segment, we are reconfirming our three-year guidance for the olefin and polyolefin indicator margins. Our expectation for Borealis polyolefin sales volumes, excluding joint ventures, remains unchanged at 3.9 million tons, representing a 10% increase compared to 2023. we are lowering the refining indicator margin to approximately $7 per barrel for the full year. Due to the outage at the Brookhausen refinery in the third quarter, we are adjusting our full year utilization rate to just below 90%. Despite this, we continue to expect total fuel sales volumes to surpass 2023 levels. The contribution from retail and commercial, although seasonally declining in the fourth quarter, will remain robust. In energy, we expect to close the divestment of our Malaysian assets by the end of the year. Excluding these assets, we anticipate higher production in the fourth quarter, primarily due to the resumption of operations in Libya at the beginning of October. we are now producing at normal rates in Libya around 30 barrels per day. The guidance for the clean tax rate for the full year remains unchanged at around 45%. Thank you for your attention. Reinhard and I will now be happy to take your questions. Thank you, Alfred. Let's now come to your questions. As always, I'd ask you to limit your questions to only two at a time so that we can take as many questions as possible. You can, of course, always re-queue for a follow-up question. We start the Q&A session with questions from Josh Stone, UBS. Yeah, thanks, Lauren.

Good morning. Two questions, please. First, if I can start on Baystar. The good news is it's back to EBIT break-even, and I appreciate the losses at the net income level have lessened, but it's still quite a material drag to the earnings in that division. So can you talk about the path to profitability from here on Baystar, and when do you think it's reasonable to expect this business to be break-even at the net income level? And then the second question on M&A, can you just maybe talk about your appetite to do deals? In the current environment, clearly debt remains low. You've got some disposal proceeds on the way. I appreciate there's quite a lot of uncertainty in the energy markets, but are you looking at that uncertainty as an opportunity or a reason to wait? And maybe as part of that answer, if you could comment on where we are on a potential merger of petrochemical assets with ADNOC. News has clearly been quite quiet of late. Maybe updates on when you think negotiations might restart, assuming you still want to press forward. Thank you.

Thank you for the questions, Josh. I will start with your M&A question, and Reinhardt will help me out on the Bay Star question. So on M&A, let me just start with the potential combination of Barouche and Borealis. I can confirm to you that we are still in ongoing and open-ended negotiations with AdMob, where we are making... some progress, but as you will understand, I cannot comment on ongoing negotiations that we continue to pursue. On the general appetite for deals in this current environment, I think I've reported that we just closed two renewable power deals, for example, in Romania in order to make progress with our strategy, and we will maintain our position here that inorganic capex can be part of our strategy if it is suitable to accelerate our strategy execution and satisfies our financial criteria in terms of delivering the right returns. So this may be an opportunity in this phase. We always continue to be open-minded and monitor the market, but I don't have anything further specific to report at this moment.

Yes, and Josh, on your question regarding Baystar, yes, we think we have made significant progress in Baystar and having a positive EBIT and an improved loss situation on the net profit is a path in the right direction. Now, what we are expecting actually is that it takes a couple of months to test the different qualities that specifically the polyethylene plant, the P3 plant, will produce in order to make sure that a stable production in that sense can be achieved. So it's not about being able to run the plant. I think the plant in itself is stable enough to run, but we don't want to run it on commodities. We want to run it on a proper portfolio and that requires still some testing. This is, with the size of this B3 plant, quite a complex topic. So, therefore, we are not expecting that there is massive hikes in utilization in the next couple of months. But if I look into 2025, I would expect that certainly by the second half of next year, we are closing into a break-even. And then, of course, with an improved performance, we're expecting also a positive net profit going forward. Very good. Thank you.

Thank you, Josh. We are now moving to Matt Smith, Bank of America.

Hi there, good morning. Thanks for taking my questions. A couple as well, please. And the first is just continuing the focus on the chemicals business. You know, noting the comments you made in your prepared remarks of the market fundamentals, you know, haven't changed all that much despite, you know, small improvements to the margins sequentially this quarter. I was just wondering if you could talk about how those margins have evolved since the quarter end this that might be useful and just to sort of frame our expectations into 2025. And then my second question was on the cash flow statement, really, noting a very strong quarter once again for cash flows, not much of a benefit from working capital this time around, only a small release. I just wanted to check your thoughts. Do you think at current commodity prices, The working capital cycle is fairly stable, or should we expect some movement in Q4? Thank you.

Thank you, Matt. I will start with the chemicals and the market, and Reinhard will then answer your question regarding networking capital and cash flow. So on the chemicals market, I think one should highlight that if you look at the total market environment, there is some of the basics have moved a little bit, but no fundamental change in the basics. But I think I would like to point to our specific business situation, which I think is important. showing some significant improvements here. If you take Borush, we were actually able to Middle East Asia market. They had a record third quota sales volumes. and they also were able to improve their price premium versus the market benchmarks. So that is showing for the product slate that we find customer demand, and they can move that at, you know, prices that were slightly improved versus the market benchmarks. For the Borealis business, with a focus on Europe, what we have actually seen, about a 12% volume increase in the third quarter, and at the same time, we have also found that our that the indicator margins and, consequently, our pin sales margins moved directionally in the same way were improved in the third quarter versus the second quarter. And I think important to point out that the growth came not just from the productivity products, but was across all segments. So also in the specialty segments, we saw some growth there, which is, of course, a positive kind of sign. Then you asked how has it moved since the... Since the third quarter, it's now in October, we have seen for polyethylene and polypropylene a slight strengthening of the indicator margins versus the Q3 average. And I just want to remind you that these indicator margins are reflective of the productivity part of our business, whereas the specialty part is less volatile, less following this market dynamic. So from that perspective, yes. I think a good movement in the first three quarters, some good volume developments, some good margin developments. Now we'll see how we will move this further. Good start of the fourth quarter in October.

Yeah, and Matthew asked about cash flow expectations, specifically on the networking capital side when it comes to quarter three and quarter four. Now, in quarter three, we had a slightly positive networking capital effect on cash flow. which is a positive sign because in spite of the high commodity prices in general and the fact that we are storing gas still in Q3, we are actually taking some inventory on board traditionally, and this also happened in Q3 in 2024. Now, Q4 traditionally is a quarter where the first elements of sales from our storages in the gas business kick in. This is dependent on weather influences. So if we are entering into a colder season, if we are entering into an early winter season, There will be more gas that will be stored. If there is any kind of shortages in the supply market, the gas storage is there to buffer that. So we are expecting that there is some outflow of gas, and with that also inventory, leading to positive networking capital effects. We are, of course, also seeing that we want to be prepared from a traditional week of December to get into a stronger January. As always, keeping some of the inventories specifically in the fuels and the chemicals business. So I'm not expecting a huge effect there. However, as you indicated, we're expecting maybe the general pricing level to slightly go down, and that would help also that. So in general, yes, I'm expecting positive networking capital contribution in quarter four. Perfect.

Well, thank you very much. Matt, thanks a lot for your questions. We now come to Michele Della Vigna, Goldman Sachs.

Thank you very much for your time. I have two questions, if I may. The first one is on the China stimulus. I was wondering if you're starting to see some early signs of it impacting the polyolefin market, or if maybe you expect to see it more coming through in 2025 with a bit of a recovery in the construction sector. And then secondly, I wanted to go back to your biofuel strategy. We're starting to see some implementation of the Red Redirective in some countries in Europe. I'm wondering if perhaps you can give us a bit more visibility of when you expect the main implementation in Central and Eastern Europe, and specifically in Germany. We're starting to see some tightening of the renewable diesel rules for 2025. I was just wondering if you had any comment on how that could impact your biofuel business in the region. Thank you.

Thank you for the questions, Michele. Let me try and answer those. On the China stimulus, of course, this is, let's say, a welcome incentive that is raising the hope for increased economic activity in China. I did report that Borush had a record sales in quarter three. To be honest, I'm not sure I would attribute this to this stimulus from there. I don't think there was enough time to actually create this forward movement. And I think also there's quite a, in the real estate sector, there's quite some overhang in China that needs to be worked through, in my opinion. Nevertheless, I do think with Port Rouge and with the specialty products from Port-au-Prince, we are in a good position to fuel exactly into some of those segments, right? So the energy transition with significant investment into oil, renewable energy in Asia, but also in China, that will require more networks, so wire and cable insulation will be of demand there, and we'll see some movement from these kind of initiatives. I also think when you look at the differentiated materials around plastic pressure pipes and gas pipes and things like this, this can also potentially benefit from such initiatives. Your second question on the biofuels, as you know, we have as a target set for ourselves that by 2030 we will have about 1.5 million tons of renewable fuels and feedstocks for chemicals. And our biggest focus, half of that quantity, should go to sustainable aviation fuels. And there, of course, we see now the implementation of the mandates starting next year at a lower percentage of 2% and then ramping up to 2030 with the 6%. We have timed our investments in such a way that our first big dedicated plant in Romania, the South HBO plant, will come on screen about 2028. and we predict that the regulations will be implemented at this point, and there will be a market shortage that will be a good timing for bringing our plant online. We have also now started up and is fully running our coprocessing plant in the refinery in Schlechert, where we are producing about 160,000 tons of feedstock from bio sources into the fuel mix that we have. and that is helping us to meet the bio quota that is in place and that will be further ramped up. Thank you. Thank you, Michaela, for your questions. Next questions come from Peter Lowe, Redfern.

Thanks. You've lowered your refining margin assumption for the year, which implies no recovery really in 4Q. Can you talk a bit about what you're seeing in refining markets and what you expect for next year? And then secondly, just on chemicals and the guidance for polyethylene sales volumes of 1.9 million tons this year, that implies quite a big step up versus the current run rate in 4Q. Can you just perhaps talk a bit about kind of where that's coming from?

Thanks. Yeah, let me maybe start with refining margins. And so what we actually saw during the third quarter on the refining indicator margins in Europe is that actually in August we had the trough of what we saw. In the entire third quarter, we had about an average of $5 per barrel And like I said, August was the low. In September, we saw it move up. And in October, it moved further up to just below $6 per barrel. I think this is a rather volatile situation that we have seen. But with the third quarter coming, What it was, we decided to bring down the three-year forecast from $8 to $7 per barrel in order to recognize also what happened in the third quarter. The fourth quarter, as I said, started a little bit below six, so stronger than the third quarter of this year, and we'll see how the remainder here happens. I do want to point out that if you look at... First couple of months in our fuels and feedstock business, about half of our result is coming from the retail business. And we have continued to see also in the third quarter a strong performance of the retail business. with expanded retail margins, actually, and good volumes that we found in the market. So that is helping us to balance out some of the refinery impacts here. Then on the polyethylene volumes, I think your reference was... around the polyethylene sales volumes in... I think it was a 3.9 for Poveglianus. Okay.

For the polyethylene.

So, okay, it was the total polyolefin business. I'm not sure you asked polyethylene or polyolefin, but let me maybe give you the start with the accumulated polyolefin piece. We said that we will sell about... 3.9 million tons for the full year. Now, if you look at the quarter three year to date, we are about 2.85 million tons And then we need another 1.05 million tons in order to get to that full year. We have actually seen pretty strong performance also in the quarter three with a 12% increase versus last year. And we think this will also be reflected in the fourth quarter of this year, that we will show a slightly stronger performance versus the Q3. Thank you. Thank you. Thank you, Peter, for your questions. We now come to Sassi from Morgan Stanley.

Please, Sassi, go ahead with your question. Hi, thanks for taking my questions. I had two, please. The first was on the dividend. I recognize we are one quarter ahead of the decision, but I just wanted to understand your thinking on this. So far, in nine months, the company generated 4.4 billion euros CFFO, only slightly below the 4.6 billion generated in the nine months last year, despite a big change in working capital year on year. Just wondering if the company were to CFO that was in line with last year, can we expect a similar dividend as well, which was arguably at the higher end of the 20% to 30% guidance payout rate? Are there any other factors that we should be considering? The second was on the proceeds from the divestment of the Malaysian business. The closure of the sale has been delayed from the end of first half to now, end of 2024. And the companies also included the production and I suppose the cash flows from this business. But the overall cash consideration of around $900 million, that has remained unchanged. I was just wondering why that was. You mentioned closing adjustments. Is that negative in that context?

Yeah, Sasi, let me come to your questions on dividends first, and you're right. It's a little bit of a mature answer or a comment that I will give on that. First of all, I think we are proud that the group is able to produce very stable and predictable cash flows, and that also in different business environments, the integrated group is able to provide this kind of confidence cash flows in a way that allows us to fully live up to the dividend policy that we have. What I mean with that is that from the levels that we see is that we clearly think that there will be an ordinary dividend and there will be a special dividend. as our dividend policy foresees. That is as much as I can say today, and the levels of our operating cash flow, including networking capital, will be ultimately communicated by end of January. We are still seeing that the business environment for fourth quarter is not the easiest. On the other hand, I have commented a little bit on networking capital. So therefore, we should see that coming ahead. but the importance of distributing dividends is very high for OMB and therefore we will come up with a proper and adequate proposal. There is no other hidden agendas regarding other means of cash utilizations. So therefore, of course, we will take into account what's the economic environment, what's the strategic development, the pace of the transformation. But all that taken was also the case in 2023. So we believe a special dividend should be given and that we see an adequate level there. Regarding the proceeds of the divestment in Malaysia, we indeed have seen a little bit of a delay of the closure of Malaysia. But, you know, we are having this business then in our area, and we are... working here from a locked box system. So we earn the money and that will be adjusted in the way how the proceeds are at the end of the period until closing. So therefore, this is a wash and change is nothing on the expected cash in from that transaction in total. So you always have to take what we earn plus what we get from the transaction, and that is unchanged. Thank you.

Thank you, Sassi, for your questions. We now come to Lydia Rainforest Barclays.

Thank you, and good afternoon, actually. Two things for me, actually. Firstly, can I ask you to comment on Libya and sort of where we are in terms of the production levels and what your expectations are for that going into the end of this year and next year? And then if I could just come back to the chemicals side, because actually everything you outlined in terms of the contribution to cash flow is now sort of a third of it. The improvement in sales volumes, the improvement in the premiums as well. And it's probably just around that idea of the premium side of it. Are you finding that that is because of the change in products or is this down to actually just improving underlying demand for it? So I'm just trying to get a sense of is it something that you've changed within Borealis and the product you're offering or is this actually just an underlying demand improvement? Thank you.

Thank you, Lydia, for your questions. Let me start with Libya, and maybe let me just go back and talk about what actually happened. So at the beginning of August, there was due to political unrest, There was a shutdown. The biggest for us was actually on the Mursuk field, which is the majority of our production there. And there was a fourth mature that was declared on this, which had an impact during the shutdown of about 23,000 barrels per day. Now you take this and the force majeure then was lifted on the 3rd of October and we are now back into the full production again. So if you take that impact during the shutdown of 23,000 barrels per day and average that over the year it has an impact of 4.6 thousand barrels per day for the full year that it's reducing our average annual production. We are expecting now for the rest of the year as I said we're back into production and of course the expectation is that this continues until the end of the year to deliver the production as we are used to. The chemicals premiums that you talked about, I think what we have actually seen The area is that the indicator margins in the market have improved in the third quarter period. slightly versus the second quarter in Europe. So there's a general improvement in the margin scenario in the markets. But you are, of course, correct that in our product mix, there's always a bit of a variation. And as you know, our specialty product sales, they are responsible for about 60% of our margin generation. But the main improvement really in this third quarter mainly came from the better market environment that we have seen there. In Asia, the situation was very similar to this. The differentiated product portfolio that Paroosh has always shows a a price premium versus the market benchmarks, and in average they were able to improve both in polyethylene and polypropylene above these benchmark premiums that they had previously. So main driver improved market conditions.

Thank you.

Thanks a lot, Lydia, for your questions. Next is Matt Lofting, J.P.

Morgan. Hi, James. Thanks for taking the questions. Two, if I could, please. First, I just wanted to come back to cash flow, if you could talk a bit about your underlying expectations for fourth quarter cash inputs at the CFFO level. excluding obviously the working cap, which you already covered earlier. In particular, I was interested in the extent to which some of the gaps from the third quarter in terms of the sales volumes around Libya, the contribution from the Berghausen refinery, etc., begin to come back in terms of the former, how you're thinking about sales versus production. And then second, just coming back on chemicals, we've obviously seen some of the underlying improvements that you've talked about earlier and encouraging to hear that you're continuing to see that come through. I just wondered in terms of the P&L numbers, negative inventory effects have been sort of something that have continued to sort of weigh on the numbers through the last two or three quarters. Under the market conditions that you outlined earlier, would you expect to see that inventory effect stabilize from the fourth quarter and beyond? Thank you.

Matt, coming back to the cash flow, you mentioned two important factors. One is a returning of Libya production, and the second is the return of the Bulkhausen asset that was out of operation. Both had negative effects on the cash flow in third quarter. Whereas in the Libya case, there was, of course, a situation where we did not have a single lifting in the third quarter, and we are expecting to have liftings in fourth quarter. It is not yet sure whether we can have a lifting in December. So, therefore, the lifting schedule is one that can vary, and therefore it's too early for us to say whether this is a full quarter or whether there is maybe one lifting that is not yet ready or not yet full and worth it. switch into January, that is something we will be able to update you then later in the year. In Bruckhausen, certainly we have both positive effects on the fuels and feedstock as well as on the chemical side in Bruckhausen. Bukhausen on the fields in Vistok is very much of a swing capacity that we hope to fill. Quarter four is traditionally not the strongest when it comes to driving season. This only starts in early winter in the second half of December around Christmas. So therefore, we are expecting that a little bit lower than Q3 in general. And let's, in regards to cash flow, not forget that, of course, from the refining business as such, the average lower refining margins will also have a negative impact on the cash flow. So this is to give you a little bit of a balanced view on how cash flows work. might develop, so there is some positives, really, with Buchhausen and Libya coming back. But then we are also a little bit cautious about the basic environment and the refining margins in general. When you are talking about the inventory effects in chemicals, we have observed this kind of negative inventory effects, but still on a moderate level, I would say, in Q2 as well as in Q3. So that was not really something that moved the needle a lot. So therefore, I think in Q4, we'll rather see a neutral effect from that. This depends very much whether we see any higher swings. Also, it has indicated that going into October, we are seeing a little bit of a lower pricing environment here. But if that is more or less then kept stable for the three months, we are thinking that there might be some inventory effect that would swing into the positive or at least neutral area.

Thank you, Matt, for your questions. There is a follow-up question from Matt Smith, Bank of America.

Hi there. Thanks for letting me follow up. I know we've covered the cash flow deltas in real depth, so thank you very much for that. I just actually wanted to add in one more that came to mind, and it was just whether you'd be able to call out the quantum of the Norwegian tax instalment in the third quarter, noting that you, of course, have two. in the fourth quarter and perhaps that will help us to base our expectations into 25 given that will repeat across the first half of the year then. Thank you very much.

Yeah, happy to comment on the Norwegian tax. So traditionally we have two installments in the fourth quarter, so this always is alternating between one installment and two installments. So the maybe important thing to mention is that in the second half, we are more or less entering into the new tax year in Norway, which means that this is already adjusted than for instance lower gas prices or lower production levels. and not carrying the, I would say, legacy of a very good end of last year. So we are expecting that while there's two tax payments, the level of the tax payments will be lower than, for instance, comparable to the second quarter of this year.

Thank you, Matt. We now come to Satnan Ali from HSBC.

Hi there, thanks for taking my questions. Two, please. First one, just going back to PetChem margins. You said earlier that you're seeing a slight strengthening in the indicator margin in polyethylene and polypropylene margins versus the Q3 indicator. I don't think you touched on just the polyethylene ethylene and propylene margins. Based on your unchanged guidance for the year, it would therefore imply that the fourth quarter ethylene and propylene indicator margins would have to drop quite materially to be in line with your annual guidance. So if you could just share some comments on that, please. And the second question would be on your fuels and feedstock division. You've mentioned today and in prior quarters how important retail and commercial is to the division overall, and that it's not just refining. Would you consider giving us more color on the division to help us better forecast and model the retail and commercial segments you mentioned today, how there's expanded retail margins? So any thoughts on providing more color to us to help us have a more informed view on those subdivisions there?

Thank you.

Okay, let me start with, well, first of all, thank you for the question. So then on the chemical margins, you're correct. I talked about the polyethylene and polypropylene indicator margins in Europe where we saw a good start in the in October versus the third quarter performance. At the same time, we did see a slight softening of the ethylene and propylene margins In October, that was driven by some of the pricing changes between ethylene and propylene prices and NAFTA prices that we observed, and hence we also kept our outlook for the year with 490 for ethylene and 370 euro per tonne for propylene in the range that we previously indicated. On the fuel and feedstock segment... on 370 euro per tonne for propylene in the range that we previously indicated. On the fuel and feedstock segment, you're correct, I highlighted that because it does It does provide some information. We did actually start in our – if you look on the Internet on our capital market story, we did actually start to try and provide a bit more understanding and insights into this topic. where we have indicated what our portfolio in the retail area looks like and what the clean operating result contribution is approximately over the year. over a time period, but as we move forward, we will take, of course, your interest into consideration and see how we can improve our reporting. Thank you. Thank you, Satnam. We now come to the end of our conference call and would like to thank you for joining us today. Should you have any further questions, please contact the investor relations team. We are happy to help you and wish you a good day. Goodbye. Thank you. Thank you. Have a great day. Thank you.