LyondellBasell Industries N.V. (LYB) Q4 2022 Earnings Call Transcript

Feb. 03, 2023 2:22 PM ETLyondellBasell Industries N.V. (LYB)

Q4: 2023-02-03 Earnings Summary

EPS of $1.29 beats by $0.02 | Revenue of $10.21B (-20.45% Y/Y) misses by $487.87M

LyondellBasell Industries N.V. (NYSE:LYB) Q4 2022 Results Conference Call February 3, 2023 11:00 AM ET

Company Participants

David Kinney – Head, IR

Peter Vanacker – CEO

Michael McMurray – CFO

Kenneth Lane – EVP, Global Olefins and Polyolefins

Kimberly Foley – EVP, Intermediates & Derivatives & Refining

Torkel Rhenman – EVP, Advanced Polymer Solutions

Michael McMurray

This represents our 12th consecutive year of annual dividend growth. We continue to invest in maintenance and growth projects with $1.9 billion in capital expenditures. A significant portion of this capital funded the final stages of construction of our world-scale PO/TBA plant.

Startup activities remain on track for the end of this quarter. Our transformation of is working across our company to rigorously manage and track the progress of our value enhancement program. We look forward to sharing the progress of this program at our Capital Markets Day in March.

As a reminder, volatility in natural gas prices impacts our cost for not only gas, but also steam and electricity. We estimate that a $1 per million BTU change in the price of natural gas impacts the energy cost of our directly operated assets by approximately $175 million per year across the company with 80% of this impact in North America and 20% in Europe.

These estimates do not include the impact of gas price on feedstock cost. Before I turn the call over to Ken and then to each of our business leaders, who will describe our segment results in more detail, let me address some of your annual modeling questions for 2023 on Slide 11.

As our new world-scale PO/TBA plant ramps up, we expect to produce and sell about half of the asset’s nameplate capacity in 2023. We remain confident that our value enhancement program can achieve recurring annual EBITDA of $150 million by the end of 2023 through the execution of about 1,000 projects.

In order to achieve this benefit, we expect to incur a similar amount of onetime capital and operational cost of about $150 million, with the majority of these costs allocated to capital. Major planned maintenance for 2023 included a turnaround at one of our Midwest ethylene crackers in the O&P Americas segment, turnarounds at our acetyls assets and 3 propylene oxide plant turnarounds within our I&D segment.

Kimberly Foley

Thank you, Ken. Please turn to Slide 14 as we take a look at our intermediates and Derivatives segment. Fourth quarter EBITDA was $291 million. Styrene margins improved due to lower feedstock costs. Oxyfuel margins remained well above historical fourth quarter averages.

Oxyfuel volumes declined as the timing of the vessel sailings resulted in unusually high third quarter volumes. We operated our assets at rates of approximately 75%. Our propylene oxide and styrene joint venture in the Netherlands is expected to restart this month after 3 months of downtime in response to volatile European energy costs and lower demand.

We look forward to initial volumes from the new PO/TBA asset in Houston by the end of the quarter. We plan to operate our assets across the IND segment at approximately 80% in the first quarter. In January, we are encouraged by unseasonably strong oxyfuel margins with low butane feedstock costs and strong oxyfuel blend premiums.

We expect relatively stable margins for the segment for the first quarter. We developed multiyear maintenance schedules to ensure that our plants can safely and reliably serve our customers. As it works out, 2023 will be a heavy year for maintenance across several of our PO/TBA assets.

Maintenance is scheduled for 2 of our 3 PO/TBA plants at our Bayport, Texas facility in the second and fourth quarters. Our [indiscernible] PO/TBA facility in the Netherlands will also undergo maintenance from September through November. We expect the ramp-up in volumes of our new plant will be partially offset by loss production from this planned maintenance.

Nonetheless, the incremental 2023 PO and TBA volumes should be sufficient to capture typical market growth. In 2024, we expect less scheduled maintenance and the full year of production from our new assets will provide additional volumes to serve market growth.

Duffy Fischer

Two quick questions. One, in the increase in your operating rates across segments, does that contemplate some inventory build for the summer season? Or does that also — or do you see that as kind of sell-through as well for Q1? And then on the polymers for Americas, what — or what’s your plan, I guess, for the split between U.S. sold and export this year versus next year? Do you have to improve your export percent meaningfully with the new capacity in North America?

Peter Vanacker

Thank you, Duffy. I mean, let me split it up in 2 parts on your working capital question on the inventory question. First of all, Kim will give a bit of overview on the PO side. And then Kim can also talk about the olefins, polyolefins.

Kimberly Foley

Thank you, Peter. So as it relates to the propylene oxide side, yes, we’re building a a slight bit of working capital as a contingency for the startup. But once the startup is successful, which we have tremendous confidence in that inventory level will come down. And we expect throughout the year to operate at about 85% capacity based on the modest demand we see in propylene oxide right now.

https://seekingalpha.com/article/4575185-lyondellbasell-industries-n-v-lyb-q4-2022-earnings-call-transcript