LyondellBasell Industries Reports Q2 2026 Results: Full Earnings Call Transcript

LyondellBasell Industries (NYSE: LYB ) held its second-quarter earnings conference call on Friday. Below is the complete transcript from the call. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

Access the full call at Summary LyondellBasell Industries reported a strong second quarter with an EBITDA margin of 23%, driven by favorable market conditions and strategic initiatives like the Value Enhancement Program and Cash Improvement Plan. The company completed the divestiture of four European assets and plans to close its Brindisi site by 2026, focusing on more advantaged assets and reshaping its portfolio towards higher-value, less commoditized applications. LyondellBasell anticipates a long recovery period from the Middle East conflict, with global supply disruptions impacting markets.

They expect inventories to rebuild gradually, with a return to pre-conflict demand trajectories over the next year. 1 billion in liquidity, and $752 million generated from operating activities in the second quarter, with disciplined capital allocation continuing to be a priority. Management expressed confidence in their strategic direction, focusing on operational excellence, disciplined capital allocation, and long-term value creation amid dynamic market conditions. Full Transcript OPERATOR Hello and welcome to the LyondellBasell conference call.

At the request of LyondellBasell, this conference is being recorded for 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 Denison, Head of Investor Relations.

Sir, you may now begin. David Denison, Head of Investor Relations Thank you, operator, and welcome everyone to today's call. com. Today we will be discussing our second quarter results while making reference to some forward-looking statements and non-GAAP financial measures.

We believe the forward-looking statements are based upon reasonable assumptions and the alternative measures are useful to investors. Nonetheless, the forward-looking statements are subject to significant risk and uncertainty. We encourage you to learn more about the factors that could lead our actual results to differences 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 diluted 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 August 31st by calling 877-660-6853 in the United States and 201-612-7415 outside the United States. The access code for both numbers is 13746.

Joining today's call will be Peter Vanacker, LyondellBasell's Chief Executive Officer; our CFO, Agustin Izquierdo; Kim Foley, our Executive Vice President of Global Olefins and Polyolefins; Aaron Ledet, our EVP of Intermediates and Derivatives; and Torkel Rhenman, our EVP of Advanced Polymer Solutions. With that being said, I would now like to turn the call over to Peter. Peter Vanacker, Chief Executive Officer Thank you, David, and thank you all for joining today's call as we discuss our second quarter results.

The global disruption in the petrochemical markets from the conflict in the Middle East impacted production, feedstock availability, logistics, and trade flows across the industry. It also led to substantially improved earnings performance for LYB in the second quarter. The LYB team delivered an impressive EBITDA margin of 23%, which clearly demonstrates the power of our Value Enhancement Program and Cash Improvement Plan actions when market conditions are favorable. We continue to believe that market normalization will be a long process extending beyond this year.

This is already being demonstrated by the continued volatility of the conflict in the Middle East. Throughout this dynamic period, we continue to successfully execute our strategy and advance the transformation of LYB while diligently implementing our Cash Improvement Plan. During the quarter, we completed the divestiture of four European assets and, combined with the intended closure of our Brindisi site, are further reshaping our portfolio toward more advantaged assets. These strategic actions, along with our disciplined capital allocation, support our ability to create long-term value for shareholders.

With that being said, let's take a moment to review LYB safety performance with Slide 3. Safety remains foundational to how we operate. 1 is among the best in our sector and reflects the commitment of our employees and contractors. Importantly, this performance continues the improvement we have achieved over the last several years and is a direct reflection of our disciplined operating culture and unwavering focus on conducting every task safely and reliably at all of our sites.

Now turning to Slide 4, the conflict in the Middle East has created an unusually large disruption to global petrochemical markets, impacting operations, feedstock availability, logistics, and freight flows. The scale and duration of the supply loss is unprecedented, and we believe that recovery time will be measured in quarters, not months. Once the trade does open and stays open, we will see some improvement in supply. However, we estimate approximately 6 million tonnes of polyethylene capacity, or around 20% to 25% of Middle East supply, sustained damage from the conflict and will not restart until at least 2027.

Additionally, we expect delays to some plant capacity growth projects. The conflict has resulted in a shift in buying behavior amid elevated pricing and volatility. S. and European material.

In China, we saw an unusual shift in trade flows. Despite lower operating rates, Chinese producers reduced imports and increased exports primarily to Southeast Asia to take advantage of higher export prices and the supply shortfall in that region. As a result, we have seen Chinese polyethylene inventories decline by roughly 30% versus pre-conflict levels as local operating rates remained in the mid-70% range. The market expects that China may soon have to increase imports again to replenish inventories that have been drawn down, which could provide support for prices.

With inventory buffers still limited across the industry, markets remain vulnerable to additional volatility should we see further setbacks in the Middle East or other supply disruptions emerge. We expect inventories to gradually rebuild as supply chains normalize and purchasing patterns return to more typical levels, though pricing is likely to remain above pre-conflict levels. Importantly, we continue to see relatively resilient underlying demand. We have not observed broad demand destruction across key end markets, with packaging remaining stable and continuing to represent the majority of our polyethylene demand.

Healthcare and infrastructure applications show steady growth supported by areas such as pipe, wire and cable, and data center-related investments. Housing and automotive demands remain at subdued levels but are not a new headwind. We expect consumption to return to its pre-conflict trajectory over the next year. As a result, we believe gradual normalization will be driven primarily by supply recovery and inventory rebuilding rather than a meaningful change in underlying pre-conflict demand.

Now let's turn to Slide 5. Portfolio transformation is a key enabler of our strategy and is helping reshape LYB into a more advantaged and focused company. We have taken deliberate steps to improve portfolio quality and better position the company for long-term value creation. We completed the divestiture of four O&P assets in May and intend to close our Brindisi site by the end of 2026.

Importantly, we remain confident in the strength of our remaining European footprint in O&P. We continue to operate two crackers with integrated polyolefins at our Wesseling site in Germany, with a portfolio increasingly focused on higher-value, less commoditized applications. Construction of our MoReTec 1 facility at Wesseling is also progressing well and will benefit from direct integration with the crackers, supporting our circular and low-carbon solutions strategy. We retain our two PO/TBA sites in Botlek, which produce propylene oxide derivatives and oxyfuels from a first-quartile global cost position.

Our catalyst production facilities and innovation centers in Ferrara and Frankfurt continue to support our technology leadership and differentiated product portfolio. Overall, our remaining European asset base is well positioned and closely aligned with our long-term strategy. These assets are critical to both our grow-and-upgrade-the-core strategy and our ambition to build a profitable circular and low-carbon solutions business.

At our Capital Markets Day in 2023, we laid out criteria for an LYB core business that included leading market position, growing end markets, attractive returns above the cost of capital, access to advantaged feedstocks, and a strategic focus on circular and low-carbon solutions. We continue to shape the portfolio with that framework in mind.

Over the last three years we have executed a series of significant portfolio actions, including ceasing refining operations, the divestiture of our EOMD business, acquisition of a 35% stake in NetBet Saudi Arabia with the purpose of expanding capacity, shutdown of our mass flux POSM sites, exiting the Australian polyurethane assets, the sale of four European O&P assets, the planned closure of Brindisi, as well as the asset footprint and product portfolio transformation in APS. We now have a greater concentration of our portfolio connected to cost-advantaged feedstock, including 80% of our global ethylene capacity.

This will enable us to achieve higher average margins through the cycle, as already demonstrated during the second quarter, and to focus capital on the areas where we see the greatest opportunity to create long-term value. Let's now turn to Slide 6 as we discuss our financial performance during the second quarter. 1 billion, which more than tripled sequentially, driven by a significant improvement in margins during the quarter. 1 billion, respectively, at quarter end.

I will now hand over to Agustin to discuss our financial performance in more detail. Augustin Izquierdo Thank you, Peter, and good morning, everyone. Let me begin with Slide 7 as we outline our cash generation over the past 12 months. LyondellBasell converted EBITDA into cash at a rate of 80%, which aligns with our long-term target.

This performance reflects our disciplined approach to optimizing working capital while capturing favorable market opportunities. As a result, higher prices and operating rates drove an intentional build of working capital in the second quarter. 1 billion. Now let's turn to Slide 8 and review the details of our second quarter capital allocation.

During the quarter we generated $752 million of cash from operating activities. This performance reflects our continued focus on strengthening financial flexibility to capture higher prices. Improving cash generation through the quarter, capital allocation remained balanced as we funded $270 million of capital investments and returned $224 million to shareholders through dividends in the second quarter. Despite the highly dynamic market environment, our capital allocation priorities remain unchanged.

We are committed to our investment-grade balance sheet as the foundation of our disciplined capital allocation framework. 2 billion and expect sustaining CapEx to decrease by approximately $100 million following the divestiture of 4 European assets. While we have many attractive growth opportunities across the portfolio, we will remain disciplined in how and when we deploy capital by prioritizing high-return, low-cost investments that strengthen our competitive position while preserving the flexibility to advance larger growth projects once we see sustained improvement in market conditions.

We continue to make progress on our cash improvement plan and are on target to achieve $500 million of incremental cash flow by the end of 2026. Driven primarily by fixed cost reductions and lower capital expenditures, we have reduced headcount by approximately 3,400 employees, or 17% of the workforce, since the beginning of last year. Driven by portfolio changes and streamlining of our organization, these actions are enhancing financial flexibility while positioning LYB to create value across the cycle.

Looking ahead, our near-term focus continues to be investing in safe and reliable operations, executing our cash improvement plan, and maintaining our investment-grade balance sheet. Now let's turn to Slide 9 and I'll provide a brief overview of our segment results. 1 billion of EBITDA. We delivered strong profitability across all segments, reflecting stronger margins and continued focus on operational execution.

With that, I will turn the call over to Kim. Kimberly Foley, EVP, Global Olefins & Polyolefins, Refining and Supply Chain Thank you, Augustine. Let's turn to Slide 10 to discuss the performance of the Olefins and Polyolefins Americas segment during the second quarter. 3 billion, approximately four times higher than the same quarter last year.

In polyethylene, integrated margins expanded substantially. 30 per pound increase in polyethylene contract prices in April, the largest increase on record, driven by the global supply disruptions from the conflict in the Middle East. 15 per pound lower, but for the year polyethylene pricing remained stronger than 2025. Integrated polyethylene margins further benefited from higher co-product pricing.

5%, marking the highest domestic sales quarter since the first quarter of 2022. 07 per pound beginning in April. Our second quarter operating rates for the segment were approximately 90%, with our crackers operating at approximately 95% during the quarter. The strong reliability and operating performance allowed us to maximize production and capture favorable market conditions.

The investments and operating improvements delivered through our Value Enhancement Program over the last three years continue to support higher productivity, improved reliability, and strong asset performance across the portfolio. Looking into the third quarter, we anticipate resilient demand in segments such as packaging, healthcare, and infrastructure. We are closely monitoring developments in the Middle East and the potential impact to polyolefins pricing from crude oil and supply chain disruptions. 10 per pound price increase for polyethylene in August.

We plan to operate our assets in line with market demand and conduct planned maintenance activities at our Clinton and Lake Charles facilities. The outage at Clinton began its turnaround in July and is expected to last approximately 70 days, while the Lake Charles outage will begin in the second half of the third quarter and extend into the fourth quarter. As a result, the third quarter operating rates across the segment are projected to be approximately 85% of nameplate capacity. With that, let's turn to Slide 11 as we review the results of the Olefins and Polyolefins Europe, Asia and International segment.

During the second quarter, the segment generated EBITDA of $331 million, a $337 million increase over the first quarter. These results also reflect a gain on the sale of the European emissions credits of approximately $50 million. It is the strongest quarterly result of the segment since 2021. Market conditions improved significantly during the quarter as supply chain disruptions stemming from the conflict in the Middle East supported both olefins and polymer margin expansion.

To capture the improved margins, we increased operating rates to approximately 75% for the quarter, with our olefins crackers operating at approximately 85% utilization. Our Middle East joint ventures continued to operate safely through the period, but at times were limited by feedstock impacting operating rates. As Peter previously mentioned, we completed the divestiture of four European assets during the quarter, marking an important milestone in our portfolio transformation.