SECOND QUARTER 2020 EARNINGS
July 31, 2020
CAUTIONARY STATEMENT AND
INFORMATION RELATED TO FINANCIAL MEASURES
CAUTIONARY STATEMENT
The statements in this presentation relating to matters that are not historical facts are forward-looking statements. These forward-looking statements are based upon assumptions of management which are believed to be reasonable at the time made and are subject to significant risks and uncertainties. Actual results could differ materially based on factors including, but not limited to, the business cyclicality of the chemical, polymers and refining industries; the availability, cost and price volatility of raw materials and utilities, particularly the cost of oil, natural gas, and associated natural gas liquids; the impacts of the COVID-19 pandemic in geographic regions or markets served us, or where our operations are located, including the risk of prolonged recession; competitive product and pricing pressures; labor conditions; our ability to attract and retain key personnel; operating interruptions (including leaks, explosions, fires, weather-related incidents, mechanical failure, unscheduled downtime, supplier disruptions, labor shortages, strikes, work stoppages or other labor difficulties, transportation interruptions, spills and releases and other environmental risks); the supply/demand balances for our and our joint ventures' products, and the related effects of industry production capacities and operating rates; our ability to achieve expected cost savings and other synergies; our ability to successfully execute projects and growth strategies; any proposed business combination, the expected timetable for completing any proposed transactions and the receipt of any required governmental approvals, future financial and operating results; legal and environmental proceedings; tax rulings, consequences or proceedings; technological developments, and our ability to develop new products and process technologies; potential governmental regulatory actions; political unrest and terrorist acts; risks and uncertainties posed by international operations, including foreign currency fluctuations; and our ability to comply with debt covenants and service our debt. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the "Risk Factors" sections of our Form 10-K for the year ended December 31, 2019, and our Form 10-Q for the quarter ended March 31, 2020, which can be found at www.LyondellBasell.com on the Investor Relations page and on the Securities and Exchange Commission's website at www.sec.gov.
The illustrative results or returns of growth projects are not in any way intended to be, nor should they be taken as, indicators or guarantees of performance. The assumptions on which they are based are not projections and do not necessarily represent the Company's expectations and future performance. You should not rely on illustrated results or returns or these assumptions as being indicative of our future results or returns.
This presentation contains time sensitive information that is accurate only as of the date hereof. Information contained in this presentation is unaudited and is subject to change. We undertake no obligation to update the information presented herein except as required by law.
INFORMATION RELATED TO FINANCIAL MEASURES
This presentation makes reference to certain "non-GAAP" financial measures as defined in Regulation G of the U.S. Securities Exchange Act of 1934, as amended.
EBITDA, as presented herein, may not be comparable to a similarly titled measure reported by other companies due to differences in the way the measure is calculated. We calculate EBITDA as income from continuing operations plus interest expense (net), provision for (benefit from) income taxes, and depreciation & amortization. EBITDA should not be considered an alternative to profit or operating profit for any period as an indicator of our performance, or as an alternative to operating cash flows as a measure of our liquidity. We also present EBITDA exclusive of adjustments for "lower of cost or market" ("LCM"), which is an accounting rule consistent with GAAP related to the valuation of inventory. Our inventories are stated at the lower of cost or market. Cost is determined using the last-in,first-out ("LIFO") inventory valuation methodology, which means that the most recently incurred costs are charged to cost of sales and inventories are valued at the earliest acquisition costs. Market is determined based on an assessment of the current estimated replacement cost and selling price of the inventory. In periods where the market price of our inventory declines substantially, cost values of inventory may be higher than the market value, which reduces the value of inventory to market value. This adjustment is related to the decline in pricing for many of our raw material and finished goods inventories. Fluctuation in the prices of crude oil, natural gas and correlated products from period to period may result in the recognition of charges to adjust the value of inventory to the lower of cost or market in periods of falling prices and the reversal of those charges in subsequent interim periods as market prices recover.
Cash from operating activities yield from EBITDA excluding LCM is a measure that provides an indicator of a company's operational efficiency and management. Cash from operating activities yield from EBITDA excluding LCM, as presented herein, may not be comparable to similarly titled measures reported by other companies due to differences in the way the measures are calculated. For purposes of this presentation, cash from operating activities yield from EBITDA means cash from operating activities divided by EBITDA excluding LCM.
Free cash flow, Free operating cash flow and free operating cash flow yield (FOCF Yield) are measures of profitability commonly used by investors to evaluate performance, free operating cash flow and free operating cash flow yield, as presented herein, may not be comparable to similarly titled measures reported by other companies due to differences in the way the measures are calculated. For purposes of this presentation, free cash flow means net cash provided by operating activities minus capital expenditures. Free operating cash flow means net cash provided by operating activities minus sustaining (maintenance and HSE) capital expenditures. Free operating cash flow yield means the ratio of free operating cash flow to market capitalization.
Reconciliations for our non-GAAP measures can be found on our website at www.LyondellBasell.com/investorrelations.
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SECOND QUARTER 2020 HIGHLIGHTS
STRONG CASH GENERATION DURING CHALLENGING MARKET CONDITIONS
$0.3 B | $0.8 B | $0.94 | $1.3 B | |||
NET INCOME | EBITDA | DILUTED EPS | CASH FROM OPERATING | |||
$0.2 B | ACTIVITIES | |||||
$0.7 B | $0.68 | |||||
NET INCOME ex. LCM | EBITDA ex. LCM | DILUTED EPS ex. LCM | ||||
3
CONSISTENT SAFETY FOCUS
INCORPORATING BEST PRACTICES FOR VIRUS RESPONSE
Injuries per 200,000 hours worked 0.5
0.4
0.3
0.2
0.1
2016 | 2017 | 2018 | 2019 2Q20 YTD | ||
LyondellBasell | ACC Top Quartile | ||||
4 | Source: American Chemistry Council (ACC) and LyondellBasell. Note: Number of hours |
worked includes employees and contractors. Data includes safety performance from the |
acquisition of A. Schulman from August 21, 2018 forward.
FACIAL COVERING
SOCIAL DISTANCING
HEALTH SCREENING
ADVANCING SUSTAINABLE TECHNOLOGIES
CREATING PROFITABLE BUSINESS OPPORTUNITIES THROUGH MOLECULAR RECYCLING
SUSTAINABLE BUSINESS MODEL
- Recycle impure/multilayer plastic waste into olefin feedstock
- Complements existing mechanical recycling business efforts
- Satisfy growing demand for premium circular plastics
GOALS
- Develop scalable catalyzed pyrolysis technology
- Competitive economics vs. naphtha-based feedstocks
PROJECT MILESTONES
- Promising lab-scale studies - since 2018
- Pilot plant (20 ton/year) commissioning - July 2020
- Proof-of-conceptfor industrial scale - 2021/2022
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STRONG CASH CONVERSION
PRIORITIZING LIQUIDITY FOR OPTIONALITY THROUGH BUSINESS CYCLES
Cash from Operating Activities USD, billions
$7
6
5
4
3
2
1
2015 | 2016 | 2017 | 2018 | 2019 | 2Q20 LTM |
Free Operating Cash Flow | Sustaining Capex | ||||
111%
CASH FROM OPERATING ACTIVITIES / EBITDA ex. LCM
2Q20 LTM
$5.0 B
CASH FROM OPERATING ACTIVITIES
2Q20 LTM
17.6%
FREE OPERATING CASH FLOW YIELD
2Q20 LTM
6 | Note: Free Operating Cash Flow = cash from operating activities - sustaining (maintenance and HSE) capital expenditures. |
CASH GENERATION AND DEPLOYMENT
MAXIMIZING CASH FLOW TO SUPPORT REINVESTMENT AND SHAREHOLDER RETURNS
DELIVERING RESULTS
Cash from operating activities $1.3 B
Reduced working capital $0.6 B
GROWING THROUGH INVESTMENT
Slowing PO/TBA activity during pandemic
DELIVERING VALUE FOR SHAREHOLDERS
Dividends $350 MM
USD, billions $4
3 | $3.2 | |||||
2 | ||||||
$1.8 | ||||||
1 | ||||||
2Q20 | Cash from | Change in | CAPEX | Dividends | Other | 2Q20 |
Beginning | Operating | Debt | Ending | |||
Balance | Activities | Balance |
7 | Note: Beginning and ending cash balances include cash and cash equivalents, restricted cash, and liquid investments. CAPEX includes growth and sustaining |
(maintenance and HSE) capital. Working capital is the change in accounts payable, accounts receivable and inventory. |
MODERATING CAPITAL EXPENDITURE PROFILE
REDUCING INVESTMENT AND DEFERRING MAINTENANCE
$2.7 B
$2.4 B
$2.1 B | 1 | |
~$1.9 B | ||
2
3
2018 | 2019 | 2020 | 2020 | ||
Actual | Actual | Guidance | Forecast | ||
Sustaining CAPEX | Growth CAPEX | ||||
2018-2019 INVESTMENTS
Hyperzone PE and PO/TBA are the largest investments
NEAR-TERM GROWTH INVESTMENTS
Slowing PO/TBA activity during pandemic
MODERATING CAPEX FORECAST
Reducing 2020 CAPEX by ~$0.5 B
8 | Note: Sustaining CAPEX is maintenance and HSE capital expenditures. |
ACTIONS TO MAXIMIZE FREE CASH FLOW | Reducing |
SPENDING REDUCTIONS AND MANAGEMENT DISCIPLINE IMPROVE FREE CASH FLOW IN 2020 | 2020 CAPEX |
$0.85 - 1.05 B |
$0.40 - 0.50 B |
$0.45 - 0.55 B |
Reduction in | Reduction in | Improvement in |
CAPEX | Working Capital & | 2020 FCF |
Discretionary Spending |
Deferring
planned maintenance
Aggressively managing
inventories
Accelerating
cost efficiency initiatives
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RESILIENT PORTFOLIO
DIVERSE GLOBAL BUSINESS PORTFOLIO REMAINS PROFITABLE IN CHALLENGING MARKET
EBITDA ex. LCM USD, billions
$2.0
1.5
1.0
0.5
2Q19 | 3Q19 | 4Q19 | 1Q20 | 2Q20 | ||
EBITDA | EBITDA ex. LCM | |||||
CONSUMER DRIVEN
Majority of portfolio supports non-durables
DIVERSE
Global businesses serving multiple industries
ADVANTAGED
Reliable assets with commercial agility
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OLEFINS & POLYOLEFINS - AMERICAS
REDUCED EXPORT DEMAND DROVE MARGIN AND VOLUME DECLINES
EBITDA ex. LCM
USD, millions
$635 $653
$523
$477
$210
2Q19 | 3Q19 | 4Q19 | 1Q20 | Volume Margin | Other | 2Q20 | ||
EBITDA | EBITDA ex. LCM | |||||||
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OLEFINS
Margin declined due to lower co-product prices Volume declined due to lower demand
POLYOLEFINS
Margins and volumes declined due to lower demand
NORTH AMERICA FEEDSTOCK ADVANTAGE
ETHYLENE COST CURVE RETURNING TO TYPICAL HISTORICAL CONDITIONS
Ethylene Cash Cost USD / ton
$1,200
1,000
800
600
400
200
Avg 2019 | Apr '20 | Jun '20 | Jul '20F | ||||||
NA Ethane | ME Ethane | EU Naphtha | MTO | ||||||
RECENT HISTORICAL ENVIRONMENT
Typical cost curve with advantaged NA and ME feedstock costs
APRIL 2020 ENVIRONMENT
Low oil prices temporarily flattened cost curve
CURRENT ENVIRONMENT
NA and ME advantage has returned
12 | Source: LyondellBasell and IHS Markit. July forecast as of July 28, 2020. |
NORTH AMERICAN POLYPROPYLENE
IMPROVING MARKETS FOR AUTOMOTIVE AND CONTINUED STRENGTH IN PACKAGING
CHINA | EUROPE |
NEW TIRE DEMAND | AUTOMOTIVE PRODUCTION |
+11% | -31% |
Jun '20 vs. Jun '19 | Jun '20 vs. |
Pre-COVID Forecast | |
NORTH AMERICA | LYB NA PP |
AUTOMOTIVE PRODUCTION | PACKAGING ORDERS |
-26% | +20% |
Jun '20 vs. | 1H20 vs. 1H19 |
Pre-COVID Forecast | |
LYB NA PP Order Book for Automotive Markets,
- of plan 100%
75%
50%
25%
1Q20 | Apr '20 May '20 Jun '20 Jul '20 Est. |
13 | Source: LyondellBasell, IHS Markit, and Michelin. |
Note: LYB NA PP order book for the last 5 days of the month as a percentage of the non-seasonalized average monthly sales plan to automotive markets. |
The estimate for July is as of July 27, 2020.
OLEFINS & POLYOLEFINS - EUROPE, ASIA & INTERNATIONAL
STEADY INTEGRATED MARGINS DESPITE LOWER DEMAND DUE TO PANDEMIC
EBITDA ex. LCM USD, millions
$331
$291
OLEFINS
Volume decreased due to reduced demand
Margin lower due to ethylene and co-product prices declining faster than feedstock prices
$225 | $219 |
$144
POLYOLEFINS
Margin increased due to higher spreads
Polypropylene volume decreased due to reduced demand
EQUITY INCOME
2Q19 | 3Q19 | 4Q19 | 1Q20 | Volume Margin | Other | 2Q20 | ||
EBITDA | EBITDA ex. LCM | Margins improved | ||||||
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CHINA JOINT VENTURE
HIGH-RETURN PROJECT IN WORLD'S FASTEST-GROWING MARKET
ADVANTAGES
- Serving Chinese domestic market through LyondellBasell marketing network
- Expanding our global network using LyondellBasell technology and catalysts
- Flexible feedstock with naphtha sourced from partner's adjacent refinery
50/50 LYB/BORA INTEGRATED CRACKER INVESTMENT
- Low total project costs ~$2.6 B
- Low equity requirement with ~2/3 project debt financing
PROJECT MILESTONES
- First delivery of LPG feedstock - July 2020
- Commissioning - 3Q20
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1.1 0.8 0.6
MM ton | MM ton | MM ton |
Flexible Cracker | Polyethylene | Polypropylene |
Naphtha / LPG
INTERMEDIATES & DERIVATIVES
VOLUME AND MARGIN DECLINED DUE TO LOWER OXYFUELS AND DURABLE GOODS DEMAND
EBITDA ex. LCM
USD, millions
$448
$390
$329
$281
$121
2Q19 | 3Q19 | 4Q19 | 1Q20 | Volume Margin | Other | 2Q20 | ||
EBITDA | EBITDA ex. LCM | |||||||
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PO & DERIVATIVES
Volume decreased due to lower polyurethanes demand for automotive, construction and furniture markets
OXYFUELS & RELATED PRODUCTS
Margins decreased driven by lower product prices
Volumes declined due to lower gasoline and isobutylene demand
TRANSPORTATION FUEL TRENDS IMPROVING
INCREASED DEMAND FOR OXYFUELS AND GASOLINE AS MOBILITY INCREASES
U.S. Gasoline Inventory | Utilization & Mileage | ||||||||||||
VEHICLE MILEAGE | MMbbl | ||||||||||||
265 | 100% | ||||||||||||
Increasing with economy restart and summer travel | |||||||||||||
260 | 90% | ||||||||||||
GASOLINE INVENTORIES | 255 | 80% | |||||||||||
Declining with increased consumption | 250 | 70% | |||||||||||
REFINING UTILIZATION | 245 | 60% | |||||||||||
Increasing production to match demand | 240 | 50% | |||||||||||
Jan '20 Feb | Mar | Apr | May | Jun | Jul F | ||||||||
Gasoline Inventory | Refining Utilization (%) | Vehicle Mileage Relative to Feb '20 (%) | |||||||||||
17 | Source: IHS Markit, INRIX, and EIA. Inventory data is monthly average. July forecast as of July 10, 2020. |
ADVANCED POLYMER SOLUTIONS
AUTOMOTIVE MANUFACTURING SHUTDOWNS DROVE VOLUME DECLINES
EBITDA ex. LCM
USD, millions
$120 | $115 |
$102 |
$62
$23
2Q19 | 3Q19 | 4Q19 | 1Q20 | Volume Margin | Other | 2Q20 | ||
EBITDA | EBITDA ex. LCM | |||||||
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COMPOUNDING & SOLUTIONS
Volume declined due to automotive shutdowns
ADVANCED POLYMERS
Catalloy volume decreased due to reduced construction and automotive demand
INTEGRATION COSTS
$16 MM in 2Q20
REFINING
REDUCED TRANSPORTATION FUEL DEMAND PRESSURED PROFITABILITY
EBITDA ex. LCM
USD, millions
$22
CRUDE THROUGHPUT
237 MBPD - impacted by reduced demand
$(6) | $(14) | |
$(66) | MARGIN |
Coke and sulfur co-product prices maintained pricing relative to crude; hedge gains
Maya 2-1-1 decreased by $3.95 to $13.27
$(80) | ||||||||
2Q19 | 3Q19 | 4Q19 | 1Q20 | Volume Margin | Other | 2Q20 | ||
EBITDA | EBITDA ex. LCM | |||||||
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TECHNOLOGY
INCREASED LICENSING REVENUE AND STRONG CATALYST SALES
EBITDA
USD, millions
$138
LICENSING
$107 | $112 |
$83 |
Increased number of revenue milestones
CATALYST
$56
Volumes increased driven by stocking early in the pandemic
2Q19 3Q19 4Q19 1Q20 2Q20
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SECOND QUARTER 2020 SUMMARY & OUTLOOK
RESILIENT PORTFOLIO PERFORMING WELL DURING CHALLENGING MARKET CONDITIONS
LEADING | DISCIPLINED | IMPROVING | PROACTIVE |
ADVANTAGED | FINANCIAL | OUTLOOK | BUSINESS |
POSITIONS | STRATEGY | RESPONSES | |
Reliable, cost efficient operator | Efficient cash generation | Increasing fuel, automotive and | Prioritizing liquidity |
Commercial agility | Committed to strong | durables market demand | Reducing CAPEX |
Resilient portfolio | investment grade rating | Strong polymer demand from | Aggressively managing |
packaging and healthcare markets | |||
Secure dividend | inventories |
Maximizing free cash flow
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LyondellBasell Industries NV published this content on 31 July 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 31 July 2020 10:51:24 UTC