利安德巴塞爾 (LYB) 2024 Q4 法說會逐字稿

Welcome to the LyondellBasell teleconference.

At the request of LyondellBasell, 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. Thank you, sir. You may begin.

Thank you, operator.

Before we begin the discussion, I would like to point out that a slide presentation that accompanies today's call is available on our website at investors.lyondellbasell.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 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 1:00 PM Eastern Time, today until March 2, by calling 8776606853 in the United States and 2016127415 outside the United States. The access code for both numbers is 13746203.

Joining today's call will be Peter Vanacker, LyondellBasell's Chief Executive Officer; our current CFO, Michael McMurray; our incoming CFO, Agustin Izquierdo; Kim Foley, our Executive Vice President of Global Olefins and Polyolefins and Refining; Aaron Ledet, our EVP of Intermediates & Derivatives; and Torkel Rhenman, our EVP of Advanced Polymer Solutions.

During today's call, we will focus on fourth-quarter and full-year 2024 results and progress on our strategic initiatives. We will also discuss 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 fourth-quarter and full-year 2024 results. I'm very proud of how our people navigated challenges, leveraged our strengths, and remained laser-focused on our strategy throughout a year that was not easy for our industry, particularly the fourth quarter.

Let's begin, as we always do, with our safety results on slide 3.

During 2024, our employees and contractors demonstrated their commitment to outstanding safety performance. I am proud to share that our total recordable injury rate for 2024 was 0.13, our second-lowest year for the company.

Even more impressive, as LYB continues to grow, we achieved the lowest number of injuries in our history. This truly is a testament to our goal-zero commitment to safety and operational excellence. With such an impressive safety record, I would like to take a moment to highlight some of the amazing milestones we have reached this year.

We celebrated [six sites], surpassing 10-plus years of no injuries and our APS segment at record-breaking safety performance, reducing their incident rate by 39% compared to 2023. Operating safely is a prerequisite to achieving high reliability and creating shareholder value.

I applaud our team for what we have achieved in 2024 and look forward to carrying this momentum into 2025, as we continue to strive for goal-zero performance.

Let's now turn to slide 4 to discuss our financial results.

There is no getting around it. 2024 was another challenging year for petrochemicals. However, in spite of the headwinds, our strategic focus on value creation maximized cash generation and delivered solid returns to shareholders.

Earnings were $6.40 per share, with EBITDA of $4.3 billion. LYB generated $3.8 billion of cash from operations, with an outstanding 90% cash conversion ratio. We returned $1.9 billion to shareholders in the form of dividends and repurchases.

Now, let's turn to slide 5 and take a moment to reflect on where LYB and the industry are in the current cycle.

Across our key businesses, fourth-quarter industry margins are about 60% of historical averages, underscoring the depth of the current downturn. Let me share three thoughts on this challenging environment.

First, this deep and prolonged downturn is not permanent. Global demand for durable goods will inevitably return following this post-pandemic downturn. Second, LYB has the potential to capture substantial upside from the cyclical recovery in volumes and margin. And third, LYB's strategic progress in unlocking incremental value could enable us to surpass our historical cycle performance.

The opportunity is apparent in our sizable polypropylene business, where fourth-quarter margins are less than 50% of historical averages and operating rates are at least 5% to 10% points below industry norms, reflecting the severity of the downturn. For polyethylene, the margin compression is smaller but the higher unit margins for the integrated value chain provide meaningful upside.

In contrast, our oxyfuels business is currently experiencing typical fourth-quarter seasonality. But the recent peak seen in 2023, when full-year margins averaged $560 per ton, provide a measure of the upside available for this business.

We recognize that current dynamics represent more than just typical cyclical pressures. They also reflect some structural shifts in the industry, relative to prior cycles. Slower global growth, particularly in China, structurally higher energy costs, regulatory impacts in Europe and other regions, along with the potential for capacity additions to outpace demand have introduced sectoral challenges. These shifts are contributing to the depth and duration of the current downturn and will likely moderate future [mid-cycle] margins, relative to the prior decade.

This is why our strategic initiatives to unlock sustainable value across our portfolio are essential. These actions are enabling us to pivot to high-value opportunities and respond more effectively to changing market dynamics.

Our focal points during 2025 for the transformation of our Houston Refinery, the strategic review of select European assets, and strong execution of our global operating model. We are confident that these actions will lead to a durable uplift of our EBITDA margins and provide lasting benefits for navigating future cycles.

Now, if you turn to slide 6, we highlight the progress on our strategy during 2024.

In nearly two years since our Capital Markets Day, LyondellBasell has unlocked approximately $1.3 billion of incremental normalized EBITDA through the execution of our three-pillar strategy. With focus and urgency, we are leveraging our strengths and extending our advantages.

The successful start-up of our PO/TBA Plant in 2023 is adding approximately $450 million, on a mid-cycle basis, to our normalized EBITDA by leveraging our proprietary technology and advantaged feedstock positions in these attractive markets.

I'm very pleased to report that our Value Enhancement Program is exceeding our expectations. In 2024, the VEP unlocked a year and run rate of more than $800 million of recurring annual EBITDA improvements while contributing approximately $600 million to the 2024 EBITDA.

In addition, we successfully completed the divestment of our non-core EO&D business, leveraging the sale proceeds to strengthen our portfolio by acquiring a 35% share in NATPET -- that cost-advantaged, integrated, fully-propylene joint venture.

During 2025, you can expect additional progress towards toward capturing value through our strategic priority. We are confident in the progress of our VEP program and expect to exceed our goal to achieve a year-end run rate of $1 billion of recurring annual EBITDA improvements.

As you have, seen our APS transformation has encountered headwinds from automotive production declines at some of our key customers in North America and Europe. But the improved customer focus of our APS team has allowed LYB to increase our win rate for new project approvals.

And Yvonne's team is doing an excellent job in growing volumes in our Circular and Low Carbon Solutions business while our exit from the refining business remains on track.

At the same time, we are remaining extremely disciplined in how we allocate capital during this downturn by carefully prioritizing high-return capital projects and remaining steadfast to our highly-selective approach towards M&A.

As Michael will share, our capital expenditures will be lower than our prior guidance. But we have been mindful to ensure our prudence does not meaningfully impact future growth. And you can be assured that we will not compromise our M&A discipline to fill growth targets with risky or marginal acquisitions.

On slide 7, we provide an update on the growth of our Circular and Low Carbon Solutions or CLCS business. We continue to build CLCS through a focused strategy that leverages our existing infrastructure and our competitive advantages, such as innovative technologies and leading positions in growing markets with a global network of deep customer relationships.

Our CLCS business continues to grow at an impressive pace. CLCS volumes increased by 65% during 2024 to over 200,000 tons across product lines, based on mechanical recycling, chemical recycling, and renewable feedstocks. And we are generating attractive margins that are incremental to our fossil fuel-based polymers.

Our CLCS business is targeting $1 billion of incremental EBITDA, from 2 million tons of annual volumes by 2030. Despite the challenges in the chemical industry over the past year, our 2024 CLCS margins and volumes are on track with our 2030 plan.

Please turn to slide 8 and let's take a look at our updated views on the supply-and-demand picture for circular plastics. Market demand for circular plastics remains robust. Consumer preferences., and brand-owner commitments to increase utilization of recycled plastics or driving demand growth, and European regulation is bolstering demand by mandating increased utilization of recycled content in plastic packaging.

But this transition to circularity takes time. Infrastructure for plastics waste collection and sorting needs to be built. Large companies like LYB are developing technologies and building assets to increase supply while smaller companies are having mixed success improving new technologies and launching businesses. We believe capacity growth will continue to be outpaced by rising demand.

As brand owners discover the supply of circular plastics is not keeping pace with their growth plans, they are pragmatically deferring their targets for utilizing circular plastics. And some brand owners have revised previously ambitious targets to more realistic levels after considering the supply constraints. Demand growth is merely being delayed due to lack of capacity but not being eliminated.

As such, LYB and other industry observers are incorporating these constraints by scaling back 2030 forecast for industry capacity and the addressable markets. The [mega] trends and investment thesis remain intact. The market for circular plastics is expected to be short of supply and supportive of attractive margins for quite some time.

LYB's strategy has not changed. The construction of our first MoReTec chemical-recycling facility in Germany is progressing well and we are planning MoReTec-2 for Houston, with regional hubs for sourcing and sorting plastic waste in both locations. We are leveraging LYB's technologies, operations, and global marketing network to execute our strategy and build a leading position in these attractive markets.

Please turn to slide 9 and let's briefly review the evolving regulatory framework for circular plastics in Europe.

While consumer preference is a dominant driver for circular plastics, forward-thinking regulation in Europe is also strengthening demand growth. In Europe, we see regulation moving in the right direction with PPWR, the new packaging and packaging waste regulation.

With mandatory levels of recycled content in packaging, we expect PPWR will drive meaningful incremental demand for circular plastics, on the order of 4 million to 5 million tons by 2030. And even more by 2040. LYB is well positioned, through its differentiated technologies and solutions, to take advantage of this growing opportunity.

Contact-sensitive packaging with circular content is likely to require polymers produced using chemical recycling. Our proprietary catalytic MoReTec technology, currently under construction in Germany, will provide a profitable commercial scale solution.

Before I turn over the call, I would like to take a moment to share my appreciation for our CFO, Michael McMurray. As we previously announced, Michael has decided to retire, in line with his personal plan, after five years of service to LyondellBasell.

Michael has been an incredible friend and thought partner over the past three years, as we developed and executed the new strategy for the company. In addition, Michael provided outstanding leadership for our global finance team, wise counsel to our commercial leaders, and oversaw the recapitalization of our balance sheet to lock in the most favorable rates and maturities we're likely to see in our lifetimes.

Chief, I thank you for your leadership and look forward to continuing our personal friendship for many years to come.

Peter, thank you for your kind words. You have also been a great friend and partner over the past three years. Thank you.

I also want to thank my team, my colleagues, and our Board. The last five years have been fun, rewarding, and challenging. And much has been accomplished.

LYB is a great company with great people and I'm confident the company is positioned for continued success.

I look forward to following LYB's progress over the coming years. And finally, on my 50th and last earnings call as a public-company CFO, I thank all of you in the investing community. It has been a good ride.

Thank you, Michael.

I'm also pleased to share that our Board has selected Agustin Izquierdo to become LyondellBasell's next CFO, effective March 1. Agustin joined LYB in 2022, after 13 years of service in various commercial and financial roles at BASF and nearly a decade in Morgan Stanley's Investment Banking division. More recently, Augustin was responsible for LYB's O&P - Americas segment, with full P&L responsibility. Prior to that, he was a member of the I&D leadership team.

We're also pleased that Agustin is LYB's first CFO to have been promoted from within the company. We aim to continue developing top talent across all levels of the organization, as we step up our performance and culture.

Agustin is with us here today. Would you like to say a few words, Agustin?

Certainly, Peter.

I am humbled, honored, and thrilled for this opportunity. And I would like to thank our Board, LYB's executive committee and the entire finance organization for their warm welcome.

I look forward to engaging with the investment community over the coming months and working to build on [micro strong] foundations to drive results for LYB.

Thank you, Augustin.

Michael, can you please continue with a few words about our progress on capital allocation?

Absolutely, Peter. And good morning again, everyone.

Let's continue with slide 10.

As Peter mentioned, we are laser-focused on advancing our strategic priorities while maintaining a robust balance sheet that serves us well throughout the cycle. At the same time, we are committed to returning cash to our shareholders through a growing dividend and share repurchases.

During 2024, we invested $1.8 billion in capital expenditures, carefully prioritizing projects to balance investment and future profitability. Our acquisition of a 35% position, in a NATPET pet joint venture, was offset by the divestment of our non-core Ethylene Oxide & Derivatives business. We ended the year with $3.4 billion of cash and short-term investments and $8 billion of available liquidity.

Our strong cash conversion enabled us to maintain a resilient balance sheet and fully fund $1.7 billion in dividends and $195 million in share repurchases in May. We increased our quarterly dividend by 7%, marking the 14th consecutive year of annual dividend growth and continuing our track record of providing a secure, growing, and competitive dividend. And we are well positioned to extend our track record of growing our dividend in 2025. Our capital allocation priorities are unchanged and we remain committed to returning 70% of our free cash flow to shareholders over the long term.

Please turn to slide 11 and let me begin by highlighting the strong cash performance from our business during 2024.

Over the past year, our business teams generated $3.8 billion of cash from operating activities. Cash on hand remained flat for the year at $3.4 billion.

During 2024, we achieved cash conversion of 90%, well above our long-term target of 80%. In addition to typical fourth-quarter drawdown of inventories, the company was able to pull forward the release of some of the working capital provided by the closure of the Houston Refinery.

During the first quarter, we will utilize some of our cash on hand to rebuild lean year and inventories in support of our upcoming Channelview turnaround and seasonal improvements across our businesses.

In the US, tax relief associated with Hurricane Beryl allowed us to defer cash tax payments during the second half of 2024. And these tax payments will be settled during February 2025.

Now, I'd like to provide an overview of the quarterly results of each of our segments, on slide 12.

LYB's business portfolio delivered $689 million of EBITDA during the fourth quarter. Sequentially higher ethane and energy cost and lower seasonal demand impacted both of our O&P segments. Overall, olefins and polyolefins demand remained soft, particularly in Europe where utilization rates remained low.

Additionally, margin compression on declining gasoline cracks and oxyfuels impacted profitability within the Intermediates and Derivatives segment.

In 2025, refining activities will be reported as discontinued operations and our financial results will be reported under the five remaining segments.

The fourth quarter included identified items of $852 million net of tax. The items included non-cash write-downs related to our O&P - Europe, - Asia, and - International and Advanced Polymer Solution segments of $769 million and $0.42 million, respectively in costs incurred from plans to exit the refining business.

The impairments reflect the challenging market conditions for these businesses and include O&P EAI assets in our European strategic review and an Asian joint venture while the APS impairment was incurred in our specialty powders business.

Across the portfolio, a non-cash LIFO inventory valuation charge decreased pre-tax fourth-quarter results by approximately $23 million. As a reminder, our fourth quarter LIFO reconciliations reflect changes in inventory valuation over the full year. The LIFO reconciliation is not necessarily linked to our fourth-quarter valuations.

Before we discuss our segment results in detail, let me discuss our capital expenditures plans for 2025 and beyond. Given the difficult operating environment and our disciplined approach to capital allocation, we are deferring some growth investments until later in the decade.

For 2025, we expect our CapEx will be approximately $1.9 billion. Our 2025 capital plan includes approximately $700 million for profit-generating growth projects and $1.2 billion of sustaining investments to keep our assets running safely and reliably. The reduced capital plan prioritizes strategic investments in our CLCS business, our second tranche of Flex capacity, and high-return projects in our Value Enhancement Program.

We expect our 2025 effective tax rate will be approximately 17% and our cash tax rate will be approximately 10 percentage points higher. The higher cash tax rate is largely due to the deferral of 2024 US tax payments into 2025 that was provided under Hurricane Beryl disaster relief.

As we always do during the fourth-quarter call, we have provided additional 2025 modeling information in the appendix to the slide deck, describing expected impacts from major plant maintenance and other useful financial metrics.

With that, I'll turn the call over to Kim. Kim?

Thank you, Michael.

Let's begin the segment discussions on slide 13, with the performance of our Olefins and Polyolefins - Americas segment. Fourth-quarter EBITDA was $496 million. During the quarter, integrated polyethylene margins decreased as ethane and natural gas prices increased, negatively impacting margins.

Strong demand from export markets increased our polyethylene volumes. We operated our assets at approximately 80% of nameplate capacity, in line with market demand.

Our olefins crackers ran at approximately 98% of rates during the quarter. Our strong operational performance allowed us to capture additional spot sales in olefins markets, benefiting our results by approximately $40 million.

During the first quarter, we expect higher ethane and natural gas costs due to winter-energy demand, with modest improvements in product volumes following seasonal weakness and ongoing strength in export markets.

We expect to operate our O&P - Americas assets at an average rate of approximately 80% during the first quarter, due to planned maintenance downtime at our Channelview olefins assets as well as the impact of Winter Storm Enzo.

Ahead of the storm, LYB proactively reduced rates and shut down some assets. We estimate that lost volumes from the storm-related downtime will impact first-quarter EBITDA by approximately $45 million.

In line with our commitment to build a profitable CLCS business, in November, we announced a second investment in Cyclyx, a joint venture with Agilyx and ExxonMobil, reaching final investment decisions to build a second Cyclyx circularity center in Fort Worth, Texas. The facility will have the capacity to produce more than 130,000 tons per year of plastic feedstock on [advanced] for mechanical recycling and is expected to start up in the second half of 2026.

Now, let's turn to slide 14 and review the performance of our Olefins and Polyolefins - Europe, - Asia, and - International segment.

During the fourth quarter, European markets remained weak with higher feedstock cost and softer seasonal demand. Extended maintenance activities at our Wesseling site, along with additional unplanned downtime in France, reduced volumes and impacted EBITDA by approximately $20 million during the fourth quarter.

Due to this downtime, we operated our assets at rates of approximately 55%. The combined impact of weak demand and lower rates led to an EBITDA loss of $146 million. As we move into 2025, we expect improved European seasonal demand to drive higher volumes and margins.

In contrast to 2024, our O&P EAI segment has no major turnaround scheduled for the coming year. Nevertheless, feedstock supply for one of our German crackers is currently constrained due to unplanned downtime at a nearby refinery. With those constraints and ongoing soft market demand, we expect to operate our European assets at a rate of 75% during the first quarter.

Our team in Wesseling, Germany successfully completed our largest turnaround in the region during 2024. Our European strategic review continues and we expect to be in a position to issue an update on the progress in the second half of this year.

Our CLCS business continues to grow. In October, we acquired APK, allowing us to integrate its unique solvent-based, low-density polyethylene recycling technology into our comprehensive portfolio for building a profitable CLCS business. And construction is well underway for our first commercial catalytic chemical recycling plant, MoReTec-1, in Germany.

Now, let's turn to slide 15 and discuss the results of the Refining segment.

During the fourth quarter, we incurred an EBITDA loss of $24 million. Margins remained relatively flat despite falling gasoline and diesel spreads due to improved utilization of our catalytic cracker. During the quarter, we operated the refinery at approximately 90% of capacity, following unplanned downtime in the third quarter, with an average crude rate of 244,000 barrels per day.

Looking forward, refinery shutdown activities began, following Winter Storm Enzo in January and are expected to be completed within the first quarter. While the storm caused a slight delay, we remain on track as we have already shut down the first train of crude and coker units. With the second train, the CAT cracker and auxiliary equipment to follow.

In light of these activities, we expect final refinery utilization rates to be approximately 35% over the quarter.

Our team remains highly focused on a safe and reliable shutdown, as we wind down operations of our 107-year-old refinery. Our number one priority has and always will be safety.

I would like to take the opportunity to commend our team for an amazing job during this journey.

With that, I'll turn the call over to Aaron.

Thank you, Kim.

Please turn to slide 16, as we take a look at our Intermediates and Derivatives segment.

Fourth-quarter EBITDA was $250 million. Fourth-quarter oxyfuels margins were in line with typical winter lows, driven by lower prices for crude oil as well as lower gasoline crack spreads.

We experienced modest volume improvement in our (inaudible) derivatives business during the quarter despite weak demand for durable goods. (inaudible) margins remain under pressure, given global supply and demand fundamentals.

Despite declining raw material prices, we operated our I&D assets at a rate of approximately 70% during the fourth quarter to match low seasonal demand.

The I&D business achieved several strategic milestones in 2024, including the divestment of our non-core Ethylene Oxide and Derivatives business and the operation of our newest PO/TBA asset, at 78% rates for the year, surpassing our 2024 goal of 70%.

With this steady progress, operating rates are expected to run at benchmark rates going forward. These significant milestones highlight the decisive actions we are taking to exit businesses where LYB does not have a path to market leadership while growing and upgrading our core businesses and assets that are aligned with our long-term strategy.

As we begin the first quarter, we expect to see moderate demand improvement across most businesses as customers begin restocking after year-end inventory management. Additionally, we anticipate octane premiums will improve with the end of the winter and the favorable butane-to-crude ratios will continue to support long-term oxyfuels fundamental.

We plan to operate our assets at approximately 80% during the first quarter, inclusive of a small amount of unplanned downtime and lost volumes due to Winter Storm Enzo.

With that, I will now turn the call over to Torkel.

Thank you, Aaron.

Now, let's review the results of our Advanced Polymer Solutions segment on slide 17.

Fourth-quarter EBITDA was $15 million. Volumes were pressured by significantly lower fourth-quarter demand from automotive customers across all regions, slightly offset by favorable margins.

Looking ahead, we expect the first quarter will reflect continued progress from our efforts to regain market share, with our renewed focus on customer-centricity. Our customer-centric approach helped drive approximately 20% EBITDA improvement during 2024 and an increase of 46% in our net promoter score from customers versus the prior year.

The team has made substantial progress in transforming our business with strategic customers by building back trust and increasing our win rate to gain new project qualifications. This progress helped us achieve above market global volume growth for our sizable polypropylene compounds and masterbatch businesses during 2024.

In addition to our focus on transforming the business, I would like to congratulate the APS team for achieving record-setting safety performance in 2024, surpassing our prior record from 2023. I truly believe our progress in refilling our growth funnel and achieving superior safety results reflects our attention to detail and confirms we are on the right path to restoring and exceeding our historical performance.

With that, I will return the call to Peter.

Thanks, Torkel.

I would like to thank the entire LyondellBasell team for delivering such resilient results amidst a very challenging macroenvironment.

To close out on the segments, let's turn to slide 18 and discuss the results for our Technology business, on behalf of Jim Stewart.

During the fourth quarter, catalyst volumes moderated on typical seasonality while we achieved higher licensing revenue by reaching project milestones that resulted in segment EBITDA of $108 million. With this progress, fourth-quarter EBITDA exceeded the prior year by approximately 40%.

First-quarter results for the Technology segment are expected to decline to levels at or below the third quarter of 2024. While catalyst sales should improve with favorable seasonality, we expect moderating licensing revenue as project approvals for polyolefin-capacity additions subside across the world.

Please turn to slide 19, as we discuss the near-term outlook by region and end markets.

As you heard from our business leaders, we expect modest seasonal demand improvements across most businesses during the first quarter.

In the Americas, we expect typical seasonal demand recovery will be met with tighter supply due to planned downtime across the industry, from an unusually high level of spring cracker maintenance, including our Channelview turnarounds.

In Europe, we expect rising energy costs will continue to pressure the European market. Seasonal demand recovery and modest restocking of low inventories should provide some support. Moving forward, ongoing capacity rationalization appears likely and should help improve market balance between supply and demand.

In Asia, markets are showing slow but steady improvements in both volumes and margins. We are encouraged by China's targeted stimulus programs but remain cautious while monitoring for signs that these efforts can translate into more meaningful market improvements.

For the packaging sector, we expect to continue seeing steady global demand as we move ahead in the new year.

In building and construction, the US' infrastructure stimulus efforts are supporting increased industrial activity. Additionally, leading indicators for remodeling activity are predicting increased activity for the second and third quarters of 2025.

In the automotive sector, a modest recovery and seasonal demand could be pressured by elevated inventory levels across the industry. Additionally, we're watchful for changes in trade policies that could impact production as we move through the year.

For oxyfuels, stronger crude prices and typical springtime improvements in gasoline crack spreads should provide benefit as we move through the quarter. Our focus remains on reliable operations and continuous optimization across our global footprint to capture market opportunities. And as Michael emphasized, we are maintaining our laser-focus on cash generation.

Now, let me provide an overview of our outlook and how we are positioning LYB over the longer term, in slide 20.

As we move into 2025, we're beginning to see signs of recovery in key end markets. After two years of declines, domestic demand for US polyolefins had a positive inflection in 2024. Reduced global interest rates, moderating inflation, and pent-up demand all provide a supportive backdrop for the inevitable recovery in demand for durable goods. But we remain watchful of the potential impacts that tariffs could have on affordability and global trade.

Despite these uncertainties, LYB remains well positioned as the favorable oil-to-gas ratio continues to provide a cost advantage for our US and Middle East [projection].

Our portfolio transformation is well underway, with strategic initiatives to strengthen and upgrade our core businesses. Recent milestones include the acquisition of NATPET, the divestment of our EO&D business, ongoing progress for our European strategic review, and our exit from Refining.

During 2024, we have made excellent progress toward building our profitable CLCS business, by starting construction of our first MoReTec facility and bolstering our technology position with investments such as APK.

Recent assessments by EcoVadis and Sustainalytics rate LYB in the Top 10% for our industry. LYB is at the forefront of providing sustainable solutions for our customers.

And our VEP is now on track to unlock at least $1 billion of recurring annual EBITDA by the end of this year.

I am very proud of the progress our teams have made during 2024. And I'm confident that LYB is well positioned to achieve our strategic priorities while rewarding shareholders.

Now, with that, we're now pleased to take your questions.

(Operator Instructions)

Steve Byrne, Bank of America.

Yes. Thank you.

I was just curious how much CapEx you expect to invest to reach that 2 million-ton-level of circular plastic in the next five years?

Presumably, that will be largely the [circularly] revive but how do you get that margin uplift from that?

You have a lot of confidence in it, is that level of confidence sufficient to get some long-term contracts before you build the plan?

Thank you, Steve. This is Peter. Very good question.

We alluded to the fact that we have around 20% of our total CapEx that is being invested in our CLCS business. We remain very confident because you have seen the very good growth that we have in the entire CLCS portfolio in 2024. And we see the margins - that they are in line with what we have said at the Capital Markets Day in March 2023.

So remember the incremental margin of $500 per ton. And it's incremental because that does not include the margin that is, for example, in the cracker. Take into consideration, as well, that our portfolio in 2024 did not yet include any substantial chemical recycling -- so MoReTec, technology products -- as we are investing in the 50,000 tons capacity in Cologne.

If you do the back-of-the-envelope calculation, that would stand for, let's say, around $25 million to $30 million incremental EBITDA, starting up towards the end of 2026. And as I said in my prepared remarks, as well, we are now very deeply engaged in the second investment, which is at double capacity.

So 100,000 tons of MoReTec that would then be built at our refinery site in Houston. Not a final investment decision but there is quite a lot of resources, in the meantime, that are busy with the engineering and the preparation to move them into a final investment decision.

Patrick Cunningham, Citi.

Hi. Good morning.

Peter, you painted the picture of material upside and margins, just from getting back to normal mid-cycle levels. But I think there were some very abnormal things which, maybe, benefited 10-year averages.

Now, sitting with plenty of supply overhang across a number of chains, sluggish demand, does anything suggest this is the new normal? If it is, can you be more aggressive with your strategy pivots?

Yeah. Thank you, Patrick. A very good question as well.

We showed this chart to show what the upside is, as we are moving towards an environment that, maybe, will not happen in Q1 but that we believe will continue to develop as we move towards the second half of 2025.

In terms of higher demand, we see some uptick in demand and you've seen the numbers if you just look, for example, at the demands in North America for polyethylene. Well, the year-on-year domestic demand improved by 4%. The overall demand improved by 8% in polyethylene. And that is because there was a very good cost position and continues to be a good cost position that the North American players have in order to be able to export more. So export grew by 12% year on year.

But you see the same, already, if we look at our Propylene Oxide and Derivatives, even if everybody is saying: 'Okay, durable goods, we don't see a big uptick in demand.' Well, we were able to grow our Propylene Oxide and Derivatives business by 4% year on year, 2024, compared to 2023.

So we see that there is this uptick possible.

Another point I want to repeat: we have alluded to that also in the previous earnings calls, there is not a huge amount of additional capacity that is coming on steam cracker capacity, polyethylene and polypropylene capacity this year and also next year.

And we are well positioned also on the other side. In oxyfuels and Propylene Oxide and Derivatives because we have our new unit, which is performing extremely well -- very pleased with that.

So lowest cost, lowest carbon footprint, propylene oxides are very well positioned also, as we see continuous demand, growth for oxyfuels, on a global basis.

Josh Spector, UBS.

Hi. Good morning. It's Christopher Perrella, on for Josh.

With all the moving parts in the first quarter, is EBITDA growth positive in the first quarter, with the turnarounds? Can you bracket what your EBITDA expectations are, near term?

Let me answer that question, Christopher.

Of course, what you always see, normally, in the first quarter is that there is an uptick in demand -- that is seasonality. But of course, I also need to point out to the fact that the first quarter always starts with where the fourth quarter, actually, is ending.

So we start at a low point, higher heating costs. For example: feedstock costs, higher energy costs as we move into the first quarter.

What will be, of course, very important for you to look at over first quarter is that we have a very large turnaround in Channelview. This is not a small one. You've seen the financial impacts that that turnaround has.

In addition to that, we anticipated or we took measures prior to the freeze. Enzo hitting, let's say, Houston and surrounding. So we did, proactively, take measures. We did shut down a number of lines to minimize the impact of the freeze. So that will, of course, impact Q1, with slightly lower operating rates as a consequence in (inaudible).

We have slightly higher rates than in I&D, slightly higher rates than, also, in Europe, Asia and International for O&P. Let me point out that North American demand, as I said before, in PE and PP, remains on that trajectory of recovery.

So it remains strong but, as said before, Q1 starts where Q4 ended. So a slow start in the year but we remain having wider level of confidence.

As we move towards 2025, we see points in certain industries, also regionally, that has a huge amount of additional capacity asset. And so we see points whereby demand is starting slowly but steadily to improve.

Peter, if I might, could I add a comment about the turnaround? Or turnarounds I think is a better way to characterize it

I want to help all of you with your modeling. When we're taking down an olefins unit, as well as our metathesis or Flex unit and all of our C4 processing, the impact is not just the olefins, it's the propylene and C4 molecules, when we talk in each of these calls about optimizing the cost of ethylene.

I wanted to make sure I highlighted that because last year, we had a turnaround and it was a $70 million impact. You see, this time, it's $190 million. So I wanted to help everybody better understand what that is.

Jeff Zekauskas, J.P. Morgan.

Thanks very much.

Lyondell has been characterized by dividend increases, through the years, and EBITDA has been under pressure but cash flows have been good.

Has the dividend increases for Lyondell come to an end or are dividends looking like they could increase in 2025?

Thank you, Jeff. Good question as well.

I'm going to start and, maybe then, also hand over to Michael.

You heard me saying and you heard Michael say, as well, in the prepared remarks, fantastic cash flow generation throughout the year 2024, after the year 2023 where we did that as well -- and I'm personally very pleased with the attention that all our people have on cash flow generation -- you see, the results out of that, it is not just by coincidence.

In addition to that, of course, we're doing that big transformation during 2025, which helps in having a very focused portfolio that is then also helping us to continue the trajectory, as we have said at the Capital Markets Day, on very good cash flow conversion

So if you look at all these factors, that's why we -- Michael and I -- said in the prepared remarks, we continue to be very well positioned to continue the trajectory to increase our dividends.

Of course, not a decision, at this point in time. As you all know, that's a decision that is following in May. And that will be taken then by the Boards. But if we look at the numbers, we continue to be quite confident.

Michael?

A couple of things that I'd add, Peter, is one, the balance sheet is in phenomenal shape, maturity profile looks wonderful.

And then, we've been very disciplined and balanced from a capital allocation perspective. We've been rewarding our shareholders with the dividend. We're also, in the market, buying back shares as everyone has seen.

But we've also been very disciplined from a capital expenditure perspective. And for the benefit of investors, if you'll recall that we said, on average, we're going to spend about $2 billion over the period '23, '24, and '25.

And actually, we've taken out about $750 million from those previous plans. So we are being very, very disciplined, given the market conditions. But we're confident that we have the ability to responsibly grow our dividend in the future.

And that CapEx -- the prioritization that we did, very intensively, during 2023 and 2024 and, again, now for 2025 is, really, a different view on how we are prioritizing our CapEx. Diligent view on all the different projects, taking into the consideration the portfolio change that we are making.

So it's not a major impact that I expect that that has -- if you look at our growth for the big projects like, for example, the MoReTec-2 project; like for example, our next flexible metathesis, the Flex(2) units in Channelview -- it's not impacting those very important strategic growth projects.

Vincent Andrews, Morgan Stanley.

Thank you.

Peter, you made a couple of comments about capacity: one in Europe suggesting that we might finally some meaningful rationalization there.

And I think, also, when you were talking about the Technology segment, you talked about how you're seeing some future projects from customers that I think you said canceled but, maybe, you only said deferred.

But if you could just give us a little insight on what you're hearing and seeing and how meaningful either both of those might be to the near or medium term.

Thank you, Vincent. Very good strategic questions.

Capacity rationalization in Europe is ongoing. There has been quite some announcements, in the meantime, out there. And you know from the market that these have not just been announcements but, actually, capacities are being shut down.

And it's not a coincidence because we all know that there is quite some challenges in the European market. Energy costs, just to point to that, is extremely high.

Everybody is asking for support from the regulators to keep the industry in Europe. But in the meantime, it takes time until these decisions are being taken by the authorities and the entire industry is taking action. The list is getting longer and longer on rationalizations in Europe.

You know that we have been very early in that entire process, with our European strategic assessments. And we continue to make very good progress on the strategic assessments. Nothing that we can announce, at this point in time. But rest assured, we're making very good progress in that regard.

Now, you see the other side and that gives us, always, a good hedging and a good visibility. Because in our Technology segment, we do see that there is a slowdown in demand for licenses and that fits, very well, together with what we have been saying: that there is a slowdown in additional capacities that will be built up during the next years, five years, as long as we can look forward.

Frank Mitch, Fermium Research.

Hey. Good morning. And best wishes, again, Michael. And best and congrats, again. Agustin.

Peter, you offered that we're starting out Q at a low level, mentioning energy prices, ethane prices, et cetera. Obviously, there's a lot of price increases that are on the table. I'm speaking, specifically, on polyethylene and just O&P - Americas in general.

So we have some price increases on the table. We also have some contract resets. How do you view the margin profile for polyethylene playing out as we move through the first quarter?

Thank you, Frank. And of course, also, thank you for sending best wishes to Michael. And I'm absolutely confident that Agustin is going to be a very good successor of Michael, having worked now with Agustin since a number of years.

To your question, if you look at all the data points, no major capacity increases in North America that are hitting the markets. The surprise that we had in Q4: that prices didn't go up for polyethylene but, actually, went down, despite the fact that the quarter was very balanced with quite a lot of exports outside of the United States.

You know these price increases that are out there, for both, PE as well as for PP.

So let me hand over ,now, to our Head of the business units. To Kim. Kim, how confident are you?

I want to build a little bit on this story before I talk about confidence and price increases.

In January and December, as we've alluded to, you saw these higher feedstock and energy costs that translate to about a $0.05 or $0.06 per pound increase in ethylene. So we're coming into this market with lower starting polymer prices, as well as you've said, Frank, contract resets. So LYB and other producers have announced $7 and $5.

Do I have a crystal ball and can say that: 'Well, what's the probability of that?' No.

But what I want to remind you, to help you understand this full picture, is 5% of the industry crackers are coming offline. That's a lot of capacity. So if I'm an integrated producer and I've got an olefins outage, am I going to buy expensive ethylene to have a negative market margin and produce polyethylene? I don't think so.

So I think it's really important that everybody understands the full gist and the importance of 'we've got to have margin throughout the chain'. So don't have a crystal ball but I'm pretty confident that we're going to see some margin or some price improvement in the first quarter.

And it had some impacts on (inaudible) as well.

Yes.

Yes, very good.

Kevin McCarthy, Vertical Research Partners.

Yes. Thank you and good morning, everyone.

My compliments on slide number 5, which I think is interesting to compare and contrast the degree of depression across some of these markets.

Peter, I'd appreciate your updated cycle view on the propylene chain or polypropylene. It seems to me, on the one hand, these cracker closures should also serve to diminish supply of propylene monomer. On the other hand, I think you have a lot of these crude oil-to-chemical projects around the world, particularly longer term, that are meant to maximize propylene coming out of refineries and so forth.

So how do you view, maybe, the next two or three years in that chain? And might you plan to take strategic action there yourselves?

Yeah. Thank you very much.

Kevin, let me hand over to Kim on that question.

Kevin, I think as you've seen, the industry go to lighter feedstocks, more ethane versus (inaudible).

You've seen a decline in propylene. A lot of people have, as such, built PDH units that were converting propane to propylene.

And see, a lot of that capacity has been in China. So you're seeing China set the floor here for propylene and to polypropylene dynamics.

LyondellBasell, for us, being an integrated propylene producer, it's important for us not only on polypropylene but on propylene oxide. So we've announced that we are -- an FID for what we call our Flex(2) or metathesis unit.

And we are taking back control of the propane molecules for us. Not only as we shut down our refinery and lose our refinery-grade propylene. But also, as we think about how to have better integration through our chains.

I want to add to that, of course, that we continue to be very engaged in Saudi Arabia with our joint venture that we have built up called NATPET.

So we have, of course, that capacity in polypropylene, which is the lowest-delivered cost capacity, very good feedstock conditions, and we continue to work with our partner on the expansion project to more than double that capacity.

The other part on strategic measures is falling in European assessments. Remember, before we started with the European assessment, we took out capacity in the southern part of Italy. And as we are still working on the European assessments, we are in the markets, making good progress on that as well.

So you see that shift, strategically, with all these elements, the ones that Kim alluded to, the ones that I mentioned, to be very well positioned to grow, on one-hand side. But grow also, with a much lower cost position.

Thank you.

Ladies and gentlemen, that concludes our question-and-answer session.

I'll turn the floor back to Mr. Vanacker for any final comments.

Thank you, again, for all the excellent questions.

I also want to, again, thank our global team for delivering outstanding value and maximizing cash conversion during these challenging times, while operating safely and reliably.

Now, I would like to leave you with four key messages.

First of all, we continue to make excellent progress on our strategy to make LYB a much more focused company, with a leading, streamlined, and advantaged asset footprints and product offering.

Secondly, we're best positioned to navigate this long downcycle and we see early signs of improvement.

Third, our cash conversion and dividend yield continues to be leading in our industry. And we are well positioned to extend our track record of growing our dividends in 2025.

And fourth, we're progressing well with the execution of our company transformation to grow our asset portfolio of cost-advantaged operations from 60% to 70%. And we have started work to simplify our operating model, as a consequence and out of that.

So with that, we wish you all a great and safe weekend. Stay well. Thank you.

Thank you.

This concludes today's conference call. You may disconnect your lines, at this time.

Thank you for your participation.